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TMI Blog1971 (4) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... 2116 of 1970. P. Ram Reddy, Senior Advocate (P. Parameswara Rao, Advocate, with him), for the respondents in all appeals. -------------------------------------------------- The judgment of the Division Bench of the Andhra Pradesh High Court (GOPAL RAO EKBOTE and RAMACHANDRA RAO, JJ.) in Writ Petition No. 2720 of 1970 etc. dated 5th September, 1970, is as follows: The judgment of the court was delivered by GOPAL RAO EKBOTE, J.-In this batch of writ petitions, the constitutionality of the Andhra Pradesh General Sales Tax (Amendment) Act, 1970, is challenged. The petitioners in all these cases are commission agents carrying on trade in jaggery. The agriculturists who grow sugarcane, being unable to sell to the sugar factory, prepare out of the surplus sugarcane grown by them jaggery and sell the same through the commission agents. These agriculturists ordinarily depend upon agriculture except for the preparation of jaggery and selling the same. In the original Act, section 11(1) provided for licensing of any person who on agreed commission or brokerage buys or sells on behalf of known principals. The State Government was empowered to exempt fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision led to the amendment of section 11 along with the insertion of other provisions by the impugned Amendment Act, i.e., Act 9 of 1970. In section 5 of the Act, after the proviso to sub-section (1), the following proviso is inserted by section 2 of the Amendment Act: "Provided further that a dealer in jaggery shall pay a tax at the rate of two paise on every rupee upto the 31st March 1966 and at the rate of three paise on every rupee on and from the 1st April 1966, of his turnover irrespective of the quantum of turnover." For section 11, which was struck down, the following section has been substituted by section 4 of the Amendment Act: "The tax or penalty due under this Act, in respect of a transaction of sale or purchase effected by any agent on behalf of a principal who is a resident of the State shall be assessed or levied and collected from the agent, in every case where such principal would be otherwise liable to pay such tax or penalty in respect of that transaction. Where the agent has paid the tax or penalty in respect of such transaction he may, without prejudice to his other rights to recover from his principal such tax or penalty, retain out of the moneys payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of tax under the principal Act as amended by this Act." Section 9 of the Amendment Act relates to exemption from liability to pay tax in certain cases. It is as follows: "(1) Where any sale of jaggery has been effected during the period between 1st August, 1963 and the commencement of section 5 of this Act in so far as it relates to item 77, and the dealer effecting such sale has not collected any amount by way of tax under the principal Act on the ground that no such tax could have been levied or collected in respect of such sale, or any portion of the turnover relating to such sale, and where no such tax could also have been levied or collected if the amendments made in the principal Act by this Act had not been made, then, notwithstanding anything contained in section 8 or the said amendments, the dealer shall not be liable to pay any tax under the principal Act, as amended by this Act, in respect of such sale or such part of the turnover relating to such sale. (2) For the purposes of sub-section (1), the burden of proving that no amount by way of tax was collected under the principal Act in respect of any sale referred to in sub-section (1) or in respect of any portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on any intelligible differentia and there is no nexus with the object which the Amendment Act seeks to achieve. Secondly, it was contended that section 9 worded as it is should be read as a part of section 2 of the Amendment Act by which the new proviso is added to section 5(1) of the principal Act and is a part of the substituted section 11. Thus read, he submitted that the new proviso to section 5(1) and the new (sic) Constitution inasmuch as the dealers in jaggery similarly situated have been invidiously discriminated by levying tax from those dealers who have collected the tax on the relevant transactions and the dealers who have not so collected the tax on the relevant transactions. The transactions in both those cases, it is argued, are of the same nature and liable to be taxed under the principal Act read with the Amendment Act. His contention, thirdly, was that the base of imposition of tax under the Amendment Act is not the transaction of sale or purchase of jaggery but the base now is the collection or non-collection of the tax by the dealers. That cannot, in his submission, form the basis for levying sales tax. On this ground, he contended that these provisions ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for consideration, it can be seen that section 11 read with the new proviso to section 5(1) undoubtedly classifies dealers in jaggery on the one hand and the dealers in other commodities covered by sections 5 and 11 on the other. This classification commenced from 1st August, 1963, and ends on 1st July, 1970, the period for which multiple point tax is levied on jaggery irrespective of the minimum quantum of turnover. The classification even after that continues but takes a different turn. Jaggery is removed from the multi-point tax schedule and placed in the schedule of single point tax by raising the rate of tax. In so far as the change effected from multi-point to single point tax is concerned, no arguments attacking the validity of the proviso on that ground were advanced before us. The concentration of attack was on removing the minimum quantum of turnover only in the case of jaggery and eventually classifying the dealers in commodities having minimum quantum of turnover and dealers in jaggery without any such minimum quantum of turnover. The object was that by giving retrospective effect the invidious discrimination has been aggravated. The classification has no rational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to tax something. It can pick and choose as stated above persons, objects, methods and even rates of taxation if it does so reasonably. A statute thus is not open to attack on the ground that it taxes some persons or objects and not others. Protection of equality clause does not demand a mathematically precise, logically complete or a symmetrical classification. Although thus a class legislation is prohibited, there is a large room for classification. Such classification would violate article 14 only when it makes an improper discrimination by conferring particular privilege upon a class of persons arbitrarily selected from a large number of persons, all of whom stand in the same relation to the privilege granted and between whom and the persons not so favoured no reasonable distinction or substantial difference can be found justifying inclusion of the one and the exclusion of the other from such privilege. In other words, it is only when within the large range of its selection, the law operates unequally and cannot be justified on the ground of valid classification that article 14 can be said to attract. Thus a taxing statute may contravene article 14 of the Constitution if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It cannot be justifiably argued that once a classification is made, it must always remain so and the Legislature would have no power to bring about any valid change in the classification although it may not offend article 14 of the Constitution. Nor can it be insisted that if the classification had continued for some time no further sub-classification can ever be made and given retrospective effect in matters relating to the tax. As long as such treatment falls within the reasonable classification having the necessary nexus with the object, no exception can be taken to such classification. We are fully supported in our view by the Supreme Court's decision in T.G. Venkataraman v. State of Madras [1970] 25 S.T.C. 196 (S.C.)., In that case, the discrimination made in levying sales tax on the turnover from sale of "cane jaggery" and "palm jaggery" was attacked on the ground of article 14. After holding that "cane jaggery" and "palm jaggery" are commercially different commodities, the Supreme Court rejected the contention that cane jaggery and palm jaggery, which were treated similarly under the successive Sales Tax Acts of the State for many years past, could not be given a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature to lay down the policy in this behalf one way or the other. The only question which they perhaps can raise is that the different treatment accorded is not reasonable and proper. But we can see nothing unreasonable or improper in such classification and determination of the policy. The business in jaggery has some features which justify its separate classification. First of all, this is the only commodity produced by the agriculturists in the State which is taxed. Secondly, the transactions of sale or purchase of jaggery are conducted through commission agents only which make it easier and cheaper for the taxing authority to levy and collect the tax. Thirdly, a very large quantity of jaggery is being exported from the State which can only mean that economically in spite of taxation it is still profitable to make this commodity available in the markets outside the State. Fourthly, the State Government has been making efforts to collect the tax from the agents and indeed has collected a considerable amount by way of tax under the two successive Acts which were struck down with the consequence that the Government was required to refund an amount to the extent of one crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover because in such cases it is considered that it would not be administratively worth while to collect tax on such turnover. But it does not mean that it is a rule which is binding upon the Legislature or that there can be no exemption to this general practice of a State. It is a question of policy. If in some cases the Legislature concludes that there are administrative inconveniences or top heavy expenses are involved, it can either fix different minimum taxable turnover for different transactions or may even decide not to tax any minimum taxable turnover in a particular class of transactions having regard to its character. If it is of the opinion, as it is in the present case, that in view of the nature of taxation it is administratively feasible to collect tax from the agents with utmost convenience it can remove the minimum turnover in a particular class of transactions like jaggery. After all normally minimum turnovers are not prescribed in single point transactions as it has now been done in the case of jaggery as it is placed for future transactions under single point structure. In K.T. Moopil Nair v. State of Kerala A.I.R. 1961 S.C. 552., it was held that the courts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mble and its use in construing material provisions of the enactment to which the preamble is attached. One approach is based on the rule that the preamble is "not part of the law" as it usually precedes enacting clauses. The second approach is based on the principle that as the preamble like the title accompanies the Bill through the process of an enactment as much as any part of the purview and must comply with all the requirements of the legislative procedure, it is considered as part of the Act and the "whole Act manner" of interpretation should be followed. It is considered that "the whole Act method" of interpretation ensures that no portion of the Act receives undue importance. An examination of the decided cases would reveal that there is a large area in which both these principles operate without producing any conflicting conclusions. It is only in some marginal cases that a problem is posed as to whether the one or the other principle should be followed. In ultimate analysis, no single rule of interpretation ever concludes the meaning of a particular provision and the final result is usually determined from many rules and comparisons. What is, however, clear is that if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 does not impose any tax on those dealers who have not collected the tax and therefore that section has to be read as a part of sections 2 and 4, and if so read, it will be plain that the two provisions impose the tax only on those dealers who have collected the tax. It is, however, contended by the learned Advocate-General that section 9 in truth and in reality is a section which provides for exempting dealers from payment of tax if they have not collected the tax earlier. We have to find out as to which of the two interpretations is correct. A close and analytical reading of the scheme of the Amendment Act would leave no one in doubt that while sections 2, 4 and 8 impose the tax retrospectively and validate assessment orders etc. made during the prior period, section 9 exempts the dealers who have not collected the tax from the payment of tax. The sentence referred to above in the preamble and section 9 clearly indicate that the dealers who have not collected the tax would not be liable to pay the tax. It would not be correct to argue that they are not even liable to be taxed. The expressions used in the preamble and in section 9, in our view, do not restrict the extensive lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. But the Legislature knew that if they taxed the dealers or make the collection as the basis, they would be flying in the face of entry 54 of the State List. They have therefore rightly avoided to get into the question- able field. In view of the statement of facts appearing in the preamble, the mischief which the Legislature sought to remove and the express intention not to cause hardship to those dealers who have not collected the tax if considered along with the scheme of the Amendment Act and its provisions, no one can have any manner of doubt that section 9 merely provides an exemption from payment of tax. In this respect, the place at which section 9 appears, that is to say, after sections 2, 4 and 8 of the Amendment Act, points out to the same conclusion. Consequently an exemption provision cannot be read as a part of the charging provision. Section 9 cannot be read as a part of sections 2 and 4 because also, in our view, that section is ultra vires. It has to be necessarily read separately although it may have been introduced as a part of the same Act. In A.V. Fernandez v. State of Kerala [1957] 8 S.T.C. 561 at p. 574 (S.C.); [1957] S.C.R. 837., the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other angle. He urged that the seven years' retrospectivity, which is given by section 1 of the impugned Act to sections 2 to 4, alter the character of the so-called tax which is sought to be imposed. In his submission, it is really taking away from the petitioners the money which they have collected by way of tax under a pretext that the legislation is being made with respect to entry 54 of the State List. In reality, according to him, it is a device to get at the money collected by the Petitioners by way of tax which is not permissible under entry 54 of the State List. He further argued that in any case after section 11 as amended by Act 5 of 1968 was struck down by the High Court, from October, 1968, till 1st of June, 1970, there was no law, even invalid law, imposing tax. The amount collected during that period by the petitioners was not at all a tax. The Legislature therefore could not have enacted a law under entry 54 to get at such money. It was contended by him that if sections 2 and 4 are read along with section 9, the intention of the Legislature appears to be only to get at the money thus collected by the petitioners. The Legislature, he submits, could not be permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, which requires revenue for its multiple developmental activities, to afford to do that. When by removing the defects the Legislature can validly make a prospective law, it can as well make the law retrospectively effective. The tax recovered retrospectively like the one which will be recovered prospectively will still continue to be a tax on transactions of sale and purchase of jaggery. In Khyerbari Tea Co. v. State of Assam A.I.R. 1964 S.C. 925; [1964] 5 S.C.R. 975., Gajendragadkar, J., who spoke for the court, after holding that tea and jute being the main products of the State, it can levy tax on the two articles, said that the Legislature must inevitably be given full freedom to determine which articles should be taxed, in what manner and at what rate. The Supreme Court rejected the contention similarly advanced that the Act is a colourable exercise of a legislative power. It was held that the Act has been passed substantially for the purpose of validating the recoveries made under the earlier Act and enforcing the assessment orders passed under the Act. The retrospectivity given from the date on which the earlier Act was applied was valid. The contention that the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invalid law shall be deemed to have been made or taken under the principal Act as amended by the impugned Act. We are not impressed with the argument that section 8 apart from validating the said things makes them lawful so as to make them free from any attack even in the appeal or revision against those orders. Any such argument would be contrary to section 8(2). We are also not inclined to agree with the contention that for a period referred to in the argument of Sri P. Babul Reddy there was no law and therefore imposition of tax for that period retrospectively would amount to a colourable legislation. That period also is covered by the retrospective valid legislation. We are therefore satisfied that there is no merit in the argument advanced before us by the learned counsel. What remains to be considered is whether section 9 of the Amendment Act is valid. It was sought to be supported by the learned Advocate-General on the ground that it is a provision for granting exemption to certain dealers on valid grounds. We are, however, unable to agree with the contention. We have already pointed out that although there is material difference between a provision imposing or levyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the same nature or dealers of the same class. Consideration of hardship has little place in the structure of tax which has been given a retrospective effect. Such a provision, admittedly, did not appear in the earlier Acts. We do not therefore consider that either the preamble or the purview of the Act provides any valid basis for classification or such an exemption can be said to be reasonably connected with the object which the section seeks to achieve. Although it is true that section 9 does not expressly say that the assessments already made would not be reopened if the dealer who paid the tax now contends that he is not liable to pay the tax since he has not collected it nor does it say that such dealers cannot claim refund on the same ground (sic). There cannot, however, be any ground for reopening all the assessments. Such dealers would be entitled to claim refund on the grounds mentioned in section 9. The learned Advocate-General argued that in spite of the fact that there is no specific provision in regard to refund of the tax, which has been collected from those dealers who in reality had not collected the tax, applications for refund can be filed. He had, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These provisions are not dependent on each other and cannot be said to operate together for the same purpose. Section 9 is independent of the valid provisions and forms a complete Act within itself. By separating it, the purpose of the enactment, we are satisfied, would not be defeated. Hence section 9 alone is invalid and the rest of the provisions of the impugned Act are valid and enforceable nevertheless. In the view which we have taken the contention of Shri Venkata Rama Reddy, learned counsel for some of the petitioners, that the impugned Act does not provide any machinery for resolving disputes arising under the impugned Act and consequently they are opposed to article 14 loses its validity. It was conceded that if section 9 can be read separately, then this question would not arise. Even otherwise, the machinery provided in the principal Act is quite adequate to resolve any dispute arising out of the impugned Act. Since no other contentions were raised, the result of the foregoing is that the impugned Act is valid and constitutional except section 9, which is ultra vires of article 14 of the Constitution. The writ petitions are accordingly partly allowed. In the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure, it is said, has been in vogue for a long time. Till about 1963 under section 11 of the Madras General Sales Tax Act as well as under the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter called the "principal Act") commission agents were required to obtain and were being issued licences and if they conformed to the conditions of those licences they were not subjected to tax. In 1963 the principal Act was amended by the Andhra Pradesh General Sales Tax (Amendment) Act, 1963 (16 of 1963), which substituted a new section 11 for that which was in force till then. The new section 11 changed the pre-existing structure of assessment in that, the agents of resident principals were made liable for assessment and collection of tax though the liability of the agent was made co-extensive with that of the principal. The sales tax authorities however were making assessments of the turnover of the agents in respect of the purchase and sales of jaggery of several principals notwithstanding the fact that the turnover up to Rs. 10,000 of each was not exigible to tax. These assessments were challenged in a batch of writ petitions in Irri Veera Raju and Others v. The Commercial Tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessments had been made and tax collected became refundable. To meet this situation the Legislature enacted the Andhra Pradesh General Sales Tax (Amendment) Act, 1970 (9 of 1970). The effect of the amendments made by sections 2, 5, 8 and 9 of the Amendment Act is that a proviso was added to section 5(1) and a new section 11 was substituted for the old section 11 with retrospective effect from August 1, 1963. The amended section 11, it may be noticed, was identical with section 11 as it stood on August 1, 1963. The First Schedule to the principal Act was also amended by adding jaggery as item 77 which was made taxable at the point of first sale at 5 paise in the rupee. It was further provided that as soon as this entry came into force on the date fixed by a notification the proviso to sec- tion 5-A added by section 2 of the Amending Act would cease to have effect. Section 8 of the Amending Act purported to validate the assessments already made while section 9 granted exemption from liability to pay tax in certain cases. We have already noticed that jaggery was being taxed at the point of the first purchase of its sale between February 1, 1960, and July 31, 1963, but by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he vice of discrimination under article 14 because not only was the classification reasonable but that it was based on an intelligible differentia having a nexus with the object of the impugned Act. We shall however deal with the last-mentioned aspect presently but before we do so on the threshold of the argument of the appellants there is a valid objection to the maintainability of the writ petitions filed by the dealers who as agents of the principals had collected tax from the purchasers which as a consequence of the two decisions of the High Court referred to earlier was illegal. After the Amendment Act the levy and collection by the dealers became prima facie legal. In so far as jaggery is concerned there was also no question of any exemption of the minimum turnover of the principal of Rs. 10,000, so that the hardship which a commission agent-dealer had to undergo in trying to determine whether the turnover of each of his principals was below Rs. 10,000 before he could collect sales tax was no longer there. After the amendment by removing the exemption of Rs. 10,000 on sale of jaggery which was given retrospective effect, the dealer-agents could not now complain, which compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the State in respect of the assessments made. As there is nothing to show that what is sought to be recovered from the dealer is more than what he has collected, he has not suffered any loss nor any disadvantage which would entitle him to seek a remedy under article 226 of the Constitution. Shri P. Ramachandra Rao in Civil Appeal No. 2127 of 1970 had nothing new to add to the arguments advanced by the learned Advocates for the appellants. On this short ground alone we dismiss all the appeals except Civil Appeal No. 33 of 1971 but in the circumstances without costs. Appeal in Civil Appeal No. 33 of 1971 In this appeal Shri S.T. Desai contends that the High Court had erroneously struck down section 9 of the Amendment Act. Section 9 of the Amendment Act is as follows: "9. (1) Where any sale of jaggery has been effected during the period between the 1st August, 1963, and the commencement of section 5 of this Act in so far as it relates to item 77, and the dealer effecting such sale has not collected any amount by way of tax under the principal Act on the ground that no such tax could have been levied or collected in respect of such sale, or any portion of the turnover relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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