TMI Blog1971 (11) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Gopal Singla, Advocates, for the respondent in C.A. No. 2320 of 1968. Hardev Singh, Advocate, for the respondent in C.A. No. 1466 of 1969. S.V. Gupte, Senior Advocate (Hardev Singh and Ram Gopal Singla, Advocates, with him), for the respondent in C.A. No. 2319 of 1968. V.C. Mahajan, Advocate, for R.N. Sachthey, Advocate, for the appellants in C.A. Nos. 1466, 1467, 1469 and 1470 of 1969. -------------------------------------------------- The judgment of the court was delivered by VAIDIALINGAM, J.- These seven appeals, on certificate, are by the State of Punjab, challenging the judgments and orders of the Letters Patent Bench of the Punjab High Court dismissing in limine the appeals filed by the State against the decisions of the learned single judge either quashing the orders of assessment of sales tax made by the concerned Sales Tax Officer or directing the said officers to reconsider the orders and pass fresh orders of assessment. The assessments that were challenged before the High Court were made under the Punjab General Sales Tax Act, 1948 (Punjab Act No. 46 of 1948) (hereinafter to be referred as the Act). Civil Appeals Nos. 2320 of 1968 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able turnover for the purposes of purchase tax at Rs. 3,18,993.27 and levied purchase tax on this amount at the rate of 2 per cent. The assessment order was passed on September 26, 1963. The firm filed in the Punjab High Court Civil Writ No. 452 of 1964 challenging the order of assessment passed by the Sales Tax Officer. The grievance of the firm, as is seen from the said writ, is that the assessing authority disallowed the claim made by it, for deduction of purchase price of ginned cotton sold to the registered dealers and for inter-State trade and commerce. The firm's claim before the assessing authority appears to have been that if three maunds of kapas is ginned, it gives roughly one maund of ginned-cotton, which if disposed of in toto should be equivalent to the purchase price of three maunds of kapas originally purchased. The assessing authority appears to have proceeded on the basis that out of the total quantity of unginned cotton purchased by the firm, only 1/3rd quantity of the unginned cotton can be considered to have been sold as ginned cotton. Deductions, according to the assessing authority, under section 5(2)(a)(vi) of the Act from the purchase turnover of unginned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Ltd. v. The State of Punjab and Others [1964] 15 S.T.C. 865. We will refer later to the scope of this decision. The learned single Judge, by his order dated March 5, 1965, held that there is no indication in the order of assessment that full deduction permissible to a dealer under section 5(2)(a)(vi) of the Act, as laid down by the Division Bench, in the above decision, has been granted to the firm. In this view, the learned single judge allowed the writ petition, and directed the Sales Tax Officer to re-decide the matter and modify and make an assessment order in accordance with the law laid down in Patel Cotton Company Private Ltd.'s case [1964] 15 S.T.C. 865. The State filed Letters Patent Appeal No. 182 of 1965 under clause (x) of the Letters Patent Act, which was dismissed, in limine, by the Division Bench on July 23, 1965. In Civil Appeal No. 2320 of 1968, the order of assessment is dated February 24, 1964. The assessee filed Civil Writ No. 454 of 1964 and the High Court passed a similar order in his favour on March 5, 1965. The Letters Patent Appeal No. 196 of 1965 filed by the State was rejected in limine on July 23, 1965. In Civil Appeal No. 1466 of 1969, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeals, certificates have been granted by the High Court. The High Court, while granting the certificates has observed that though the Letters Patent appeals were dismissed in limine, certificates are being granted in view of the fact that the decision in Patel Cotton Company Private Ltd.[1964] 15 S.T.C. 865., on the basis of which the present decision had been given, was the subject of appeal before this court. In view of this consideration, certificates of fitness have been granted by the Letters Patent Bench. We may also add that though the question, regarding the legality of the assessment under the Act as being opposed to the Central Act, on the ground that no stage for collection of tax has been fixed, was raised by all the assessees, that point was not adjudicated upon by the High Court in any of these matters. Mr. V. C. Mahajan, learned counsel for the State, pointed out that the decision in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865., which was relied on by the High Court, has been overruled by this court in State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849. In consequence, he urged that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are defined in clauses (d), (e), (f), (ff), (h), (i) and (j) of section 2, respectively. Item (1) of Schedule C of the Act dealing with "cotton" is as follows: "(1) Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste." Section 2(c) of the Central Act defines "declared goods" as "goods declared under section 14 to be of special importance in inter-State trade or commerce". Section 14 declares the various goods referred to therein as of special importance in inter-State trade or commerce. Therefore, it follows that those goods are "declared goods" under section 2(c) of the Central Act. Item (ii) of section 14 of the Central Act dealing with cotton is identical with item (1) of Schedule C of the Act. It is also necessary to note that the definition of "sale" in section 2(h) of the Act excluded goods specified in Schedule C and that the expression "purchase" under section 2(ff) took in the goods specified in Schedule C of the Act. Section 5 of the Act dealt with the levy of tax on the turnover of a dealer at the rates mentioned therein and other cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those quantities of ginned cotton and cotton seeds so sold should be deducted in calculating the taxable turnover under section 5(2)(a)(vi) of the Act. The assessing authority allowed the deduction of the sale price (as against the purchase price) of the ginned cotton sold to registered dealers as also the sale price of the ginned cotton exported out of India or sold in the course of inter- State trade or commerce. The Sales Tax Officer, however, declined to allow any deduction for similar sales on cotton seeds. The assessee contended before the High Court that the sale of cotton seeds was a sale of the goods purchased by them in respect of which purchase tax was payable and since the sales were made to registered dealers or in the course of inter-State trade, the taxable turnover should be determined after deducting the purchase price of the goods sold from the gross turnover. On behalf of the State, it was contended that unginned cotton and ginned cotton are two different things and if unginned cotton is purchased and purchase tax paid on it and later on the cotton is ginned and sold, no part of the goods purchased can be considered to have been sold. It was urged that cott ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of section 5(2)(a)(vi) of the Act is illegal in that, contrary to the provisions of section 15 of the Central Act, no definite stage at which the purchase tax in respect of cotton, a declared commodity, is to be levied, has been indicated. The judgment and order of the High Court were reversed and the assessment orders quashed. This decision was rendered on April 10, 1967. The years with which this court was concerned, in the said decision, were the years of assessment 1960-61 and 1961-62. The decision in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865., was the subject of appeals in this court in The State of Punjab and Others v. Patel Cotton Company Private Ltd., Bhatinda, and Others C.A. Nos. 1120, 1123 and 1214 of 1966 decided on April 18, 1967. This court, by its judgment dated April 18, 1967, did not think it necessary to consider the correctness or otherwise of the decision of the High Court that the assessees, when they sold ginned cotton and cotton seeds, had sold the same commodity that had been purchased by them. The State appeal was dismissed on the short ground that the levy of purchase tax was opposed to the Central Act, as held by this court in Bhawani C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of such goods other than declared goods' shall be substituted and be deemed to have been substituted with effect from the 16th day of December, 1965; (c) after sub-section (2), the following sub-section shall be inserted with effect from the 1st day of October, 1958, namely: '(3) Notwithstanding anything contained in this Act,- (a) in respect of declared goods, tax shall be levied at one stage and that stage shall be- (i) in the case of goods liable to sales tax the stage of sale of such goods by the last dealer liable to pay tax under this Act; (ii) in the case of goods liable to purchase tax, the stage of purchase of such goods by the last dealer liable to pay tax under this Act; (b) the taxable turnover of any dealer for any period shall not include his turnover during that period on any sale or purchase of declared goods at any stage other than the stage referred to in sub-clause (i), or as the case may be, sub-clause (ii) of clause (a).'" Section 9 of the Amendment Act incorporated a new section 11AA in the Act, which is as follows: "11AA. Review of certain assessments, etc., of tax on declared goods- (1) Notwithstanding anything contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is specifically dealt with under the new sub-section (3) incorporated in section 5. The third proviso incorporated in sub-section (1) of section 5 of the Act provided that with effect from the date of the Ordinance No. 12 of 1967, the rate of tax in respect of declared goods was not to exceed 3 paise in a rupee. In sub-section (IA) of section 5 of the Act "declared goods" have been excluded from the reference made therein to "such goods". This amendment is also deemed to have come into effect from December 16, 1965. The new sub-section (3) added to section 5 of the Act was to have effect from October 1, 1958. Under the new sub-section (3), in respect of declared goods, the stage of levy either in respect of purchase or sale has also been definitely fixed. Under clause (b) of section 3, certain turnovers in respect of sale or purchase of declared goods, as referred to therein, cannot be included in the taxable turnover. The new section 11AA makes it obligatory on the assessing authority, under the circumstances mentioned therein, to review all assessments and reassessments made before the commencement of the Amendment Act in respect of declared goods. There is also an obligation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected and the writ petition dismissed. From the decisions of this court in Bhawani Cotton Mills Ltd.[1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577., The Stage of Punjab and Others v. Patel Cotton Co. Pvt. Ltd., Bhatinda, and Others C. A. Nos. 1120. 1123 and 1214 of 1966 decided on April 18, 1967, and Rattan Lal and Company and Another [1970] 25 S.T.C. 136 (S.C.); [1969] 2 S.C.R. 544., it is clear that levy of sales tax, under the Act as it stood on April 1, 1960, on declared goods is illegal and void. We have already referred to the fact that certain decisions of the Punjab High Court, which had taken a view similar to the one in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865., were also subject of appeals in this court. They were disposed of on February 27, 1969, by the judgment of this court in State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., The claim made by the assessees before the High Court was that in calculating the taxable turnover under section 5(2)(a)(vi) of the Act, as it stood on April 1, 1960, deductions must be made on the purchase price of unginned cotton, which has been sold later as g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " was struck down by this court in Bhawani Cotton Mills Ltd. [1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577., Certain provisions of the Act were also struck down as violative of the provisions of the Central Act. It was in consequence of the decision of this court in Bhawani Cotton Mills Ltd. [1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577., that the Amendment Act, which was preceded by the two Ordinances, referred to above, came to be enacted. We have also referred to the fact that the scheme of assessment regarding declared goods has been changed and altered by the Amendment Act. When the Amendment Act was again challenged before this court, the Constitution Bench in Rattan Lal and Company and Another [1970] 25 S.T.C. 136 (S.C.); [1969] 2 S.C.R. 544., has approved the decision in Bhawani Cotton Mills Ltd. [1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577., and accepted the position that under the Act, as it stood on April 1, 1960, sales tax in respect of declared goods could not be levied. Further, it was pointed out in Rattan Lal and Company and Another [1970] 25 S.T.C. 136 (S.C.); [1969] 2 S.C.R. 544., that the infirmities that existed in the Act, as it stood on April 1, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 3 S.C.R. 577., Rattan Lal and Company and Another [1970] 25 S.T.C. 136 (S.C.); [1969] 2 S.C.R. 544., and The State of Punjab and Others v. Patel Cotton Co. Pvt. Ltd., Bhatinda, and Others C. A. Nos. 1120, 1123 and 1214 of 1966 decided on April 18, 1967. More important than all these, is the circumstance, that by accepting the contention of Mr. Mahajan we will be completely ignoring the provisions of the Amendment Act which, we have already said, has evolved a new scheme regarding the levy of sales tax in respect of declared goods. The decision in the State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., can at the most be considered to have decided that cotton seeds are not declared goods and that it is by the manufacturing process that cotton and cotton seeds are separated. As the Act, as amended by the Amendment Act, has to be applied in respect of assessment of sales tax on declared goods, the decision in the State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., is, in our opinion, no bar to the assessee's urging their objections regarding the validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared goods. There is no controversy that the assessment orders, in the cases before us, have all been made before the date of commencement of the Amendment Act. If so, the assessing authority has to exercise his jurisdiction under section 11AA. It is also obligatory on his part to vary or revise the previous orders of assessment, so as to bring them in conformity with the provisions of the Act as amended by the Amendment Act, after following the procedure indicated therein. The fact that there is a judgment of a court is also no bar to the assessing authority to do his duty cast upon him under section 11AA. This has been made clear by sub-section (4) to section 11AA, which makes the said sub-section subject to the provisions of sub-sections (1) to (3) of the section. In view of the specific provisions contained in section 11AA, we do not think it necessary to consider and express any opinion regarding the contention of Mr. Gupte. The assessees are entitled to raise all objections available to them in law or on facts in respect of declared goods, when the assessing authority takes action under section 11AA of the Act, as he is bound to do. But, we make it clear that in the fre ..... 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