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TMI Blog1967 (8) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... der item No. 57 of the schedule of tax-free goods as substituted by the Punjab Government Notification No. 3483-E & T-54/723(CH) dated August 5, 1954. The appeals from these orders were dismissed by the Deputy Excise and Taxation Commissioner, Jullundur Division, by his orders dated August 3, 1959, and February 16, 1960. Revision petitions from these orders were dismissed by the Excise and Taxation Commissioner, Punjab, by his orders dated November 24, 1961. Revision petitions from the last orders were dismissed by the Financial Commissioner, Revenue, Punjab, by his orders dated April 27, 1962. On the application of the respondents, the Financial Commissioner, Revenue, Punjab, by his order dated August 9, 1962, referred under section 22(1) of the Punjab General Sales Tax Act, 1948, the following question of law for the decision of the High Court of Punjab at Chandigarh: "Whether Notification No. 3483-E & T-54/723(CH), dated the 5th August, 1954, whereby exemption from sales tax granted by the Government in respect of edible oils was abolished in the case of such edible oils produced in ghanis run by mechanical process was intra vires and not a law made by the Legislature of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee under section 6. Section 6(1) provided that no tax shall be payable under the Act on the sale of goods specified in the first column of the schedule to the Act. Section 6(2) provided: "The Provincial Government, after giving by notification not less than three months' notice of its intention so to do, may by like notification add to or delete from the schedule, and thereupon the schedule shall be deemed to be amended accordingly." On November 19, 1952, the East Punjab General Sales Tax (Second Amendment) Act, 1952 (Act No. 19 of 1952) was passed amending section 5 of the East Punjab Act No. 46 of 1948. Section 2 of the amending Act was in these terms: "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, namely, 'not exceeding two pice in a rupee'." It is common ground before us that before the passing of the East Punjab Act No. 19 of 1952 the State Government had issued notifications under section 5 fixing the rates of tax. In exercise of its powers under section 6(2) of the Act, the Punjab Government issued the notification No. 3483-E & T-51/2518 dated May 30, 1951, adding item No. 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed that the respondents claimed that they were not liable to pay tax on their sales of edible oil produced in ghanis run by mechanical power. The revenue authorities rejected this claim on the ground that such sales were not exempt from tax in view of the amendment of the schedule of tax-free goods by the notification dated August 5, 1954. Confronted with this notification, the respondents challenged its validity on the ground that it required the assent of the President of India. On the materials and arguments before us, we are satisfied that the real dispute between the respondents and the revenue authorities was whether the tax was effectively imposed on those sales so that the respondents may be held liable to pay tax thereon during the assessment years in question. This dispute was not properly brought out in the question referred to the High Court. We, therefore, reframe the question thus: "Was tax effectively imposed on sales of edible oil produced in ghanis run by mechanical power, so that the respondents can be held liable to pay tax on such sales during the assessment years 1955-56, 1956-57 and 1957-58?" This question involves consideration of the validity of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1952 amended section 5, in substance it inserted a new amended section 5 in Act No. 46 of 1948 with retrospective effect. The fourth question is whether the amended section 5 inserted by the East Punjab Act No. 19 of 1952 levying a tax on the taxable turnover of the dealer at such rates not exceeding 2 pice in a rupee as the State Government by notification may direct was a law imposing or authorising the imposition of a tax on essential goods within the meaning of Article 286(3) of the Constitution as it stood before the Constitution (Sixth Amendment) Act, and if so, what are the consequences. As pointed out by Ramachandra Iyer, J., in Sreenivas and Co. v. Deputy Commercial Tax Officer [1960] 11 S.T.C. 68, 75-77, on appeal from [1959] 10 S.T.C. 171., the decisions on the interpretation of section 55 of the Australian Constitution are not a reliable guide to the interpretation of the words "imposing or authorising the imposition of a tax" in Article 286(3) of the Constitution and section 3 of Central Act No. 52 of 1952. Section 55 which is directed to preserving the privileges of the House of Representatives with respect to finance and providing against their abuse has rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax was annually imposed by the Finance Act and in Bowles v. Bank of England [1913] 1 Ch. 57, 87., Parker, J., held that the Crown could not lawfully levy income-tax before the rate of tax was ascertained and the tax was actually imposed by an Act of Parliament. These dicta suggest that an Act fixing the rate of tax is a law imposing a tax. The specification of the class or classes of persons liable to pay the tax and the fixation of the rate of tax are both necessary for the imposition of a tax. Section 4 of the East Punjab Act No. 46 of 1948 took the fist step for imposing the tax. It declared who were the persons liable to pay tax under the Act. But section 5 of the East Punjab Act No. 46 of 1948 was invalid and until the passing of the East Punjab Act No. 19 of 1952 and the insertion of the amended section 5 there was no provision in the main Act fixing or authorising the fixation of the rate at which the tax was to be levied. In the absence of such a provision, there could be no levy, assessment and collection of the tax from the dealer and section 4 remained unenforceable. The East Punjab Act No. 19 of 1952 by inserting the amended section 5 in the main Act for the first t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in respect of sales and purchases of essential goods while the ban of Article 286(3) continued. But it could take effect in respect of sales and purchases of other goods. The fifth question involves consideration of the effect of the amendment of Article 286(3) of the Constitution and the repeal of Central Act No. 52 of 1952. The Constitution (Sixth Amendment) Act, 1956, passed on September 11, 1956, substituted a new clause (3) in Article 286. The effect of this amendment was that the restriction put by Article 286(3) on the operation of the amended section 5 inserted by the East Punjab Act No. 19 of 1952 in respect of essential goods was lifted, and the section thereafter took effect on such goods also. Counsel for the respondent submitted that in view of the ban imposed by Article 286(3), the amended section 5 was a still-born law and the section was not revived by the removal of the ban. In this connection, our attention was drawn to the decisions under Articles 286(2) and 13 of the Constitution. Article 286(2), as it stood before the Constitution (Sixth Amendment) Act, provided that "except in so far as Parliament may by law otherwise provide, no law of a State shall impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... life of the community. By section 2, the goods specified in the Schedule were declared to be so essential. As soon as this declaration was made, Article 286(3) came into play. Section 3 stated the conjoint effect of Article 286(3) and section 2 and declared that no law made after the commencement of the Act by the Legislature of a State imposing or authorising the imposition of a tax on the sale or purchase of any goods declared by the Act to be essential for the life of the community would have effect unless it had been reserved for the consideration of the President and had received his assent. But section 3 had no independent existence. The subject of a tax on the sale or purchase of goods other than newspapers was exclusively a State subject, see List II, Entry 54. Article 286(3) did not authorise Parliament to legislate on this subject. It only conferred on Parliament the authority to declare that certain goods were essential for the life of the community. On such a declaration being made, the check imposed by Article 286(3) came into operation. But on the amendment of Article 286(3) this check was lifted and thereafter section 3 had no force. It follows that as from Septemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution Act is not a law made by the Legislature of a State within the meaning of the unamended Article 286(3). It follows that the impugned notification took effect in respect of edible oil as from August 5, 1954, and thereafter sales of edible oil produced in ghanis run by mechanical power were taxable. But as the amended section 5 could not then affect edible oil, no tax was effectively imposed on it until September 11, 1956, during the currency of the unamended Article 286(3) of the Constitution. The respondents were, therefore, not liable to pay tax on their sales of such edible oil effected before September 11, 1956. It is common case before us that before the insertion of the amended section 5 by the East Punjab Act No. 19 of 1952 the State Government had issued notifications under section 5 fixing the rate of tax. The seventh question relates to the validity of those notifications. As the unamended section 5 was invalid, under the law as it stood before the passing of the East Punjab Act No. 19 of 1952 those notifications were not authorised by law and were invalid. The East Punjab Act No. 19 of 1952, however, inserted section 5 with retrospective effect. The effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. The contention of the respondents was that in view of this order of the Financial Commissioner the present appeals are not maintainable. There is no substance in this contention. The order of the Financial Commissioner was passed under section 22(5) of the East Punjab Act No. 46 of 1948. Section 22(5) provides that the High Court shall send to the Financial Commissioner a copy of its judgment in a sales tax reference under its seal and the signature of the Registrar and the Financial Commissioner shall dispose of the case accordingly. On receipt of the copy of the judgment of the High Court in Sales Tax References Nos. 8, 10 and 11 of 1962, the Financial Commissioner acting under section 22(5) directed that the cases should be disposed of according to the judgment of the High Court. But those very judgments are under appeal in this Court. In so far as those judgments are varied or reversed in these appeals, effect must be given to the order of this Court and the Financial Commissioner must direct the disposal of the cases accordingly. In C.M Ps. Nos. 877 to 879 of 1964, the respondents prayed for revocation of the special leave granted by this Court. There is no groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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