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TMI Blog1967 (4) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... or the appellants in C.A. Nos. 39 to 43 of 1965. -------------------------------------------------- The judgment of the Court was delivered by SUBBA RAO, C.J.-The decision on these appeals depends upon the interpretation of the relevant provisions of the Punjab General Sales Tax Act, 1948 (Punjab Act 46 of 1948) as amended by Punjab Act of 1958, relating to three categories of goods, namely, oil-seeds, iron and cotton. The facts may be briefly stated. The assessees in Civil Appeals Nos. 526, 527 and 529 of 1964 carry on business at Moga in Punjab and each owns an oil mill. They purchase oil-seeds and, after crushing the same in their oil mills, sell the oil and the residual oil-cake. They are registered dealers under the Act. The amending Act imposed a purchase tax of 2 per cent. on the purchase of oil-seeds "for use in the manufacture of goods for sale". This was in addition to the sales tax leviable on the sales of oil and oil-cake. On June 23, 1959, the Excise and Taxation Officer, Ferozepore, the 3rd respondent in the said appeals, issued notices to the 3 appellants-assessees to the effect that they did not submit their returns for the year endi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en proceedings for making assessment to purchase tax for the assessment year 1959-60 in respect of the same commodity. The appellants in both the appeals filed petitions under Article 226 of the Constitution in the High Court questioning the validity of the said orders. The said writ petitions were dismissed by a Division Bench of the High Court. Hence the appeals. We shall at first take the points raised which are common to all the appeals and then proceed to consider the points peculiar to some of the appeals. Mr. M.C. Setalvad, learned counsel appearing for the appellants in the batch of appeals relating to tax on purchase of oil-seeds, raised before us the following points which are common to other appeals: (1) Section 5 of the East Punjab General Sales Tax Act, 1948, was held to be void on the ground that it conferred essentially legislative power on the Provincial Government and, therefore, the said section was still-born and that, as the said section was the charging section, the entire Act was void, with the result Act 19 of 1952, which amend- ed section 5 with retrospective effect could not breathe a new life into the said Act. A void Act was non est and, therefore, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Act and had the effect of giving a new life to it. The first question, therefore, is whether section 5 of the East Punjab General Sales Tax Act, 1948 (46 of 1948), as it originally stood was void, and the second question is, if the said section was void whether the amendment could give life to it. The law on the subject is fairly well settled though difficulties are met in its application to each case. In Corporation of Calcutta v. Liberty Cinema [1965] 2 S.C.R. 477., on which Mr. Ganapathy Iyer relied, relates to a levy imposed on cinema houses under the Calcutta Municipal Act (33 of 1951). There, the majority held that the levy therein was a tax, that the fixing of a rate of tax was not of the essence of legislative power, that the fixing of rates might be left to a non-legislative body and that when it was so left to such a body, the Legislature must provide guidance for such fixation. The majority held in that case that such a guidance was found in the monetary needs of the municipality for discharging the functions entrusted to it under the Act. Sarkar, J., speaking for the majority, said thus: "It (the Municipal Corporation) has to perform various statutory functions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aked power on the Government to impose taxes would be good, for in every case the discharge of the constitutional duties by the Government would be deemed to be a sufficient guide for fixing the rate. We cannot accept this argument for three reasons, namely, (1) the decision of this Court in Calcutta Corporation v. Liberty Cinema [1965] 2 S.C.R. 477., should be confined only to the provisions of the Calcutta Municipal Act wherein this Court found a guidance; (2) the provisions of the Sales Tax Act, including the preamble, do not disclose any policy or guidance to the State for fixing the rates; and (3) the general constitutional power to impose taxes has no relevance for discovering a statutory policy under a particular Act. Nor does the decision of this Court in The State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. [1959] S.C.R. 379, 435., lend support to the argu- ment so widely advanced by the learned counsel. That case has nothing to do with the fixation of rates of taxes. There section 6(1) of the Madras General Sales Tax Act, 1939, as amended by Madras Act 25 of 1947, provided that no tax will be payable on any sale of goods specified in the Schedule to it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject may briefly be stated thus: "The Constitution confers a power and imposes a duty on the Legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But In view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation. It must necessarily delegate the working out of details to the executive or any other agency. But there is a danger inherent in such a process of delegation. An overburdened Legislature or one controlled by a powerful executive may unduly overstep the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation. This self-effacement of legislative power in favour of another agency either in whole or In part is beyond the permissible li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing exclusively in goods declared tax-free under section 6 whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after coming Into force of this Act." Section 5 has already been extracted. "Section 6. (1) No tax shall be payable under this Act on the sale of goods specified in the first column of Schedule B, subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax on the sale of goods which are declared tax-free from time to time under this section." It will be seen that section 4 is a charging section, that section 5 provides for fixation of rates and that section 6 prescribes for exemptions. Section 4 is made subject to sections 5 and 6. If section 5 is struck out, will section 4 become void? This will depend upon two questions, namely, (i) whether section 5 is a charging section, and (ii) even if section 4 alone is the charging section, as It is made subject to section 5 and as the section subject to which it is made was still-born, whether section 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has to be distinguished from its enforceability. It cannot be said, and indeed it is not said, that the Income-tax Act has no legal existence till the Finance Act is made, though till the Finance Act is made it cannot be enforced. But reliance is placed on section 67B of the Income-tax Act in support of the contention that its existence in the statute book keeps the Act alive, for the rate prescribed by the previous Finance Act is applicable till the new Finance Act is passed. But it will be noticed that the Court's decision was not based on the existence of the said provision but on that of the charging section itself. It follows that striking out section 5 does not make section 4 void, though till an appropriate section is inserted it remains unenforceable. The decision of this Court in B. Shama Rao v. The Union Territory of Pondicherry Writ Petition No. 123 of 1966 (decided on 20-2-1967); [1967] 20 S.T C. 215. Is clearly distinguishable. There, sub-section (1) of section 2 of the Pondicherry General Sales Tax Act (10 of 1965) provided that: "The Madras General Sales Tax Act, 1959 (No. 1 of 1959) (hereinafter referred to as the Act) as In force in the State of Madras immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serted" indicate that in substance section 5, as amended, is inserted In the Act with retrospective effect. Even so it was contended that section 5, as amended, only gave the maximum rate and did not disclose any policy giving guidance to the Legislature for fixing any rate within that maximum. Here we are concerned with sales tax. If the Act had said "2 pice in a rupee" it would be manifest that it was a clear guidance. But as the Act applies to sales or purchases of different commodities it had become necessary to give some discretion to the Government in fixing the rate. Conferment of reasonable area of discretion by a fiscal statute has been approved by this Court in more than one decision: see Khandige Sham Bhat v. The Agricultural Income-tax Officer [1963] 3 S.C.R. 809; 48 I.T.R. (S.C.) 21. At the same time a larger statutory discretion placing a wide gap between the minimum and the maximum rates and thus enabling the Government to fix an arbitrary rate may not be sustained. In the ultimate analysis, the permissible discretion depends upon the facts of each case. The discretion to fix the rate between 1 pice and 2 pice in a rupee is so insignificant that it is not possible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look at clause (ff) in section 2 of the principal Act in which the said clause was inserted. The ingredients of the definition of "purchase" are as follows: (i) there shall be acquisition of goods; (ii) the acquisition shall be for cash or deferred payment or other valuable consideration; (iii) the said valuable consideration shall not be other than under a mortgage, hypothecation, charge or pledge. Clause (h) of section 2 defines "sale" thus: "Sale" means any transfer of property in goods other than goods specified in Schedule C for cash or deferred payment or other valuable consideration but does not include a mortgage, hypothecation, charge or pledge. If we turn to the Sale of Goods Act, section 4 thereof defines a contract of sale of goods. It reads: "A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property In goods to the buyer for a price........" The essential requisites of sale are- (i) there shall be a transfer of property or agreement to transfer property by one party to another; and (ii) it shall be for consideration of money payment or promise thereof by the buyer. A sale and a purchase are different aspects of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is no doubt defined in the Sale of Goods Act as "money consideration". Cash or deferred payment in clause (ff) of section 2 of the Act satisfies the said definition. The expression "valuable consideration" has a wider connotation, but the said expression is also used in the same collocation in the definition of "sale" in section 2(h) of the Act. The said expression must bear the same meaning in clause (ff) and clause (h) of section 2 of the Act. It may also be noticed that in most of the Sales Tax Acts the same three expressions are used. It has never been argued or decided that the said expression means other than monetary consideration. This consistent legislative practice cannot be ignored. The expression "valuable consideration" takes colour from the preceding expression "cash or deferred payment". If so, it can only mean some other monetary payment in the nature of cash or deferred payment. We, therefore, hold that clause (ff) of section 2 of the Act is not void for legislative incompetence. Another argument, to invalidate clause (ff) of section 2 of the principal Act may also be noticed. It is said that that clause offends Article 14 of the Constitution on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the State not to tax at more than one stage, the amending Act by introducing the definition of "purchase" enables the State to tax the same goods at the purchase point and at the sale point. But this argument misses the point that goods purchased and the goods sold are not identical ones. Manufacture changes the identity. Therefore, the same goods are not taxed at two stages. The last argument is that the said definition only takes in the purchase of goods for use in the manufacture of goods, but tax is imposed on the purchase of goods for producing oil. To state it differently, oil is not manufactured out of oil-seeds but only produced. Reliance is placed upon the user of two words in the Act, viz., manufacturing or processing in the proviso to sub-section (2) of section 4 and sub-section (5) thereof and the expression "edible oils produced" in entry 57 of Schedule B to the Act and a contention is raised that the Act itself makes a distinction between manufacturing and processing and manufacture and production and, therefore, oil is not manufactured but only produced from oil-seeds. Support is sought to be derived from this argument from the decision of this Court in Union o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the last sale or purchase inside the State if the declared goods purchased are intended for sale in the course of inter-State trade or commerce. Explanation.-The expression 'last sale or purchase inside the State' means the transaction in which a dealer registered under the sales tax law of the State- (i) sells to or purchases from another such dealer declared goods for use by the purchaser in the manufacture of goods for sale or for use by the purchaser in the execution of any contract; or (ii) purchases declared goods from another such dealer for sale to a dealer not registered under the sales tax law of the State or to a consumer in the State." This section was amended by the Central Sales Tax (Amendment) Act (31 of 1958) with effect from October 1, 1958. The relevant part of the amended section reads: "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 purchase of such goods inside the State shall not exceed two per cent. of the sale or purchase pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a dealer for use in the manufacture of goods. This section was amended by Act 13 of 1959, and Act 24 of 1959. Under the later amendment in clause (ff) of section 2 for the words "goods for use in the manufacture of goods for sale" the words "goods specified in Schedule 'C' for use in the manufacture of goods for sale" were substituted, that is to say, the stage for taxation prescribed in the earlier definition was amended. It may be recalled that under the Central Sales Tax Act, 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. Now coming to Civil Appeals Nos. 81 of 1965 and 540 of 1965, three additional points are raised by Mr. Desai, namely, (i) by including in the term "purchase", read with the definition of "dealer", where there is acquisition of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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