TMI Blog1974 (10) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier rectification of a mistake, would not, in our judgment, make such a mistake one that is not apparent on the record. - C.A. No. 514 of 1970, C.A. No. 166, To 243 of 1973, & 2078 of 1970, W.P. No. 5361 of 1969, 893 of 1970, 5367 of 1969, 2031, To 2035 of 1970, 2534 of 1970, 5178, To 5181 of 1969 - - - Dated:- 4-10-1974 - RAY A.N., CHANDRACHUD Y.V., ALAGIRISWAMI A. AND GUPTA A.C. JJ. Girish Chandra, Advocate, for respondent No. 3 in C.A. Nos. 2078 of 1970, 167-173, 181-203, 205-216, 218-236 and 242-243 of 1973. B. Sen, Senior Advocate (Girish Chandra, Advocate, with him), for respondent No. 3 in C.A. Nos. 514 of 1970 and 166 of 1973. M. Veerappa, Advocate, for respondents Nos. 1 and 2 in the other appeals K.Srinivasan and J. Ramamurthi, Advocates, for the appellants in C.A. Nos. 166-173 and 181-243 of 1973. A.K. Sen, Senior Advocate (M. Veerappa, Advocate, with him), for respondent Nos. 1 and 2 in C.A. No. 166 of 1973. K. Srinivasan and Vineet Kumar, Advocates, for the applicants in C.A. Nos. 514 and 2078 of 1970. K.M. K. Nair, Advocate, for the respondent in C.A. No. 514 of 1970. H.B. Datar, Senior Advocate (M. Veerappa,Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality of section 8(2)(b). We consider that far from supporting the appellants that decision actually is against the contention put forward on behalf of the appellants. It is only necessary to set out what this court said in that decision. It is hardly necessary to add anything more. In that case the majority while upholding the validity of section 8(2)(b) observed: "It has been argued on behalf of the appellants that the fixation of rate of tax is a legislative function and as the Parliament has, under section 8(2)(b) of the Act, not fixed the rate of Central sales tax but has adopted the rate applicable to the sale or purchase of goods inside the appropriate State in case such rate exceeds 10 per cent, the Parliament has abdicated its legislative function. The above provision is consequently stated to be constitutionally invalid because of excessive delegation of legislative power. This contention, in our opinion, is not well-founded. Section 8(2)(b) of the Act has plainly been enacted with a view to prevent evasion of the payment of the Central sales tax. The Act prescribes a low rate of tax of 3 per cent in the case of inter-State sales only if the goods are sold to the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local sales tax for the goods in question though it may exceed the local rate in case that rate be less than 10 per cent. For example, if the local rate of tax in the appropriate State for the non-declared goods be 6 per cent, in such an event a dealer, whose case is not covered by section 8(1) of the Act, would have to pay Central sales tax at the rate of 10 per cent. In case, however, the rate of local sales tax for such goods be 12 per cent, the rate of Central sales tax would also be 12 per cent because otherwise, if the rate of Central sales tax were only 10 per cent, the unregistered dealer who purchases goods in the course of inter-State trade would be in a better position than an intra-State purchaser and there would be no disincentive to the dealers to desist from selling goods to unregistered purchasers in the course of inter-State trade. The object of the law apparently is to deter inter-State sales to unregistered dealers as such inter-State sales would facilitate evasion of tax. It is also not possible to fix the maximum rate under section 8(2)(b) because the rate of local sales tax varies from State to State. The rate of local sales tax can also be changed by the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevent discrimination between residents in one State and those in other States. Parliament thought that unless the rate fixed by the States from time to time is adopted as the rate of tax for inter-State sales of the kind specified in the sub-clause, there will be evasion of tax in inter-State sales as well as discrimination. We have already pointed out in our judgment in State of Tamil Nadu and Another v. Sitalakshmi Mills Ltd. and Others Since reported in [1974] 33 S.T.C. 200 (S.C.)., Civil Appeals Nos. 2547-2549 of 1969 and 105-106 of 1970, the objectives which Parliament wanted to achieve by adopting the rate of tax in the appropriate State for taxing the local sales. And for attaining these objectives Parliament could not have fixed the rate otherwise than by incorporating the rate to be fixed from time to time by the appropriate State Legislature in respect of local sales. It may be noted that in so far as inter-State sales are concerned, the Central Sales Tax Act, by section 9(2) has adopted the law of the appropriate State as regards the procedure for levy and collection of the tax as also for imposition of penalties." It is only necessary to add that the legislative po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly". Though the tax is levied and collected by the Government of India it is intended for the benefit of and is paid to the State whose officers assess and collect the tax. The adoption of the machinery of and the rate of tax prevalent in the State is for the convenience of assessment as well as for the convenience of the parties so that they will not have to deal with two sets of officers and two sets of laws in addition to avoiding discrimination between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer, a similar concession had not been granted to dealers who were similarly situated, that is, who had not collected any tax on their sales prior to November 10, 1964, and that such concession should be available at least in the case of assessees who had not made any collection after the judgment of the Mysore High Court in Yaddalam's case [1962] 13 S.T.C. 583., that is, January 23, 1962. There are two answers to this submission. Firstly, the fact that transactions of sale prior to the period before November 10, 1964, or at least the period between January 23, 1962, and November 10, 1964, were not given the same concession as the transactions between November 10, 1964, and June 9, 1969, does not mean that the latter concession is unconstitutional. A concession is not a matter of right. Where the legislature taking into consideration the hardships caused to a certain set of taxpayers gives them a certain concession it does not mean that that action is bad as another set of taxpayers similarly situated may not have been given a similar concession. It would not be proper to strike down the provision of law giving concession to the former on the ground that the latter are not gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this means that all sales and purchases are generally exempt from tax. This argument proceeds on the basis that the sale and purchase are different transactions. The Legislature might for the sake of convenience or from other considerations of policy make either a sale or a purchase taxable in respect of the sale of any particular goods. That does not mean that the sale and purchase in respect of the same transaction are two different transactions. They are two facets. of the same transaction. Therefore when sub- section (2A) of section 8 uses the words "the sale or, as the case may be, the purchase" it is merely referring to the fact that State Sales Tax Acts make either the sale or purchase taxable and not that where the sale is taxable the purchase is exempt from tax and where the purchase is taxable the sale is exempt from tax and therefore where one of them is exempt from tax in respect of an intra-State sale the inter-State sale is completely exempt from tax. We agree with the view of the Mysore High Court that the object of sub-section (2A) of section 8 is to exempt transaction of sale of any goods if they are wholly exempt from the tax under the sales tax law of the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (S.C.). did not consider the effect of sub-section (2A) of section 8 and therefore when there is such difference of opinion it cannot be said to be a case of an error on the face of the record. It is incorrect to say that because this court had not in Joseph's case [1970] 25 S.T.C. 483 (S.C.)., considered the argument now put forward regarding the conflict between section 6(1A) and section 8(2A) there was no error apparent on the face of the record. Clearly when it said that the effect of the Central Sales Tax (Amendment) Act, 1969, is to supersede the judgment of this court in Yaddalam's case[1965] 16 S.T.C. 231 (S.C.)., the sales tax authorities were undoubtedly entitled to rectify their earlier rectification order which was made consequent on the decision in Yaddalam's case[1965] 16 S.T.C. 231 (S.C.). After the Central Sales Tax (Amendment) Act, 1969, and the decision of this court in Joseph's case [1970] 25 S.T.C. 483 (S.C.). there was no question about the error not being apparent on the face of the record. This attack on the rectification order, therefore, fails. The other attack that the rectification order is beyond the point of time provided in rule 38 of the Mysore S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Act, 1957, and the necessary refund was also made. The Central Act was amended by the Central Sales Tax (Second Amendment) Act, 1958 (Act 31 of 1958), with effect from 1st October, 1958. One of the amendments was in regard to section 8 of the Central Act, whose sub-sections (1) to (4) were completely substituted by virtue of section 5 of that amending Act. We need refer to only one more amendment to the Central Act by the Central Sales Tax (Amendment), Ordinance, 1969 (No. 4 of 1969) hereinafter referred to as the Ordinance. It may, however, be mentioned that this Ordinance was later replaced by the Central Sales Tax (Amendment) Act, 1969, hereinafter referred to as the amending Act. By virtue of the Ordinance section 6 of the Central Act was amended, among others, by the addition of a clause (1A), which provided for levy of sales tax on dealers in respect of sales of goods effected by them in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable whether on the seller or the purchaser under the State law of the appropriate State if that sale had taken place inside that State. This section was given retrospective operation. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, open to the Commercial Tax Officer to institute proceedings for rectification of such a valid assessment. (3) The present proceeding under rule 38 of the State Rules is barred by limitation, as it is beyond 5 years of the date of the assessment order. Since, every rectification of an order of assessment gets merged in the original assessment order, the period of limitation prescribed under rule 38 ought to be reckoned from the date of assessment order and not from the date of the passing of the order of rectification. In other words, rectification of the assessment order can be made more than once, but every such rectification should be within 5 years from the date of the assessment order. (4) Under the Central Act, cotton is taxable at the point of purchase and, therefore, such goods are unconditionally exempt within the meaning of section 8(2A) of the Central Act, as amended by the Ordinance and subsequently by the amending Act. This will be so, notwithstanding the amendment of section 6(1A). It, therefore, follows that inter-State sales of cotton are exempt from liability to tax under the Central Act as amended till now. On behalf of the respondents, Sri E.S. Venkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods generally." Section 8(2A) of the Central Act, as amended by Act 31 of 1958, reads thus: "Notwithstanding anything contained in sub-section (1) or sub- section (2), if under the sales tax law of the appropriate State the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than one per cent (whether called a tax or fee or by any other name), the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale of such goods shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation .-For the purposes of this sub-section a sale or purchase of goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law it is exempt only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods." This section stood amended slightly by the Amendment Act of 1969, as a consequence of the amendment of section 6 by the addition of clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly: Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may by Rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section. " Section 9 of the amending Act of 1969 relates to validation of assessments, reassessments, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and liable to be taxed under the State law. Further while dealing with an argument based on the proviso to section 8(1) of the Central Act prior to its amendment in 1958 that the said proviso was concerned with categories of goods and not transactions of sales and purchases, the court did not decide the question as it was unnecessary for the decision in that case. This decision was subsequently affirmed by the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty Sons [1965] 16 S.T.C. 231 (S.C.). The Supreme Court while referring to section 8(2) of the Central Act has observed that that section could be interpreted in two ways thus giving rise to an ambiguity. The court, in order to dispel that ambiguity, interpreted section 9(1) of the Central Act and affirmed the decision under appeal on that ground. In Mysore Silk House v. State of Mysore [1962] 13 S.T.C. 583., this court merely applied the principles enunciated in Yaddalam Lakshminarasimhiah Setty's case. Further it also interpreted the proviso to section 8(1) as it stood then and came to the conclusion that it had reference to transactions of sales of goods in the course of inter-State trade or commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court were rendered in connection with the Ordinance of 1969. We have observed earlier that it was subse- quently replaced by an Act of Parliament. The Supreme Court in dealing with this Act also in Civil Appeals Nos. 1688 and 1689 of 1969 (State of Kerala v. Anglo Indian Direct Tea Trading Co.), in a judgment rendered on 1st December, 1969, have stated thus: "The High Court has, following the judgment of this court in the State of Mysore v. Yaddalam Lakshminarasimhiah Setty Sons[1965] 16 S.T.C. 231 (S.C.)., decided the tax cases against the State of Kerala. Since that judgment was delivered the Parliament has enacted the Central Sales Tax (Amendment) Act (28 of 1969). Thereby several changes have been made in the scheme of the levy of Central sales tax, and the judgment in Yaddalam Lakshminarasimhiah Setty's case(2) is superseded. In view of the judgment of this court in State of Kerala v. M/s. P.P. Joseph Co. and M/s. Joseph Elias [1970] 25 S.T.C. 483 (S.C.), (Civil Appeals Nos. 1228 and 1229 of 1969 decided on 14th August, 1969), the order passed by the High Court is set aside and the proceedings will stand remanded to the Sales Tax Officer to be dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed thus: "...The Legislature's intention is quite clear that it is not only the law in force when the Central Act was enacted but the State law in force from time to time. With respect, we are unable to agree with the decision in Shah Co. v. State of Madras [1967] 20 S.T.C. 146., that what has been adopted is only the law as it stood when the Act was enacted, since in our opinion, the Parliament was competent to adopt the State law not only as it existed at the time of the enactment of the Act but also as it may exist in future including amendments made from time to time, where the adoption of law is with respect to the rate of taxation and the procedural law for assessment and collection of tax. The Parliament, in our opinion, has not abdicated any of its essential legislative functions......" In view of the above enunciation, we are of the opinion that this contention of Sri Srinivasan should fail. The next question relates to validation of the assessment by the Ordinance and amending Act of 1969. We have set out the contention earlier. It is relevant to state that this contention has not been made a ground of attack in the main petition. But, since it is a question o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion. The purpose of the amending Act 9 of 1964 was to ensure that tax payable on the sale of cloth held in stock on 14th December, 1957, was realised and for that purpose sub-section (5-A) of section 5 was amended with retrospective effect. Section 34 further validated the invalid assessment orders made on the assumption that sub-section (5-A) of section 5 of the Act as it stood before the amendment empowered the levy of tax. When this court held in W.P. No. 368 of 1961 that sub-section (5-A) of section 5 did not levy a charge on the sale of cloth held in stock on 14th December, 1957, there were many assessment orders made levying tax on the sale of such cloth. As a result of the validation of such assessments which section 34 does, all those orders are deemed to have been validly done. Where the assessments had been made but taxes were not paid, it was not open to the assessees to contend that the assessment orders were invalid. Where the tax had been paid, it was not open to the assessees to claim back the taxes paid on the ground that the taxes had been illega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im by way of tax. In the instant case, it is clear that refund was ordered by virtue of a rectification sought by the assessee on the basis of Yaddalam Lakshminarasimhiah Setty's case [1965] 16 S.T.C. 231 (S.C.). It is also now settled that the effect of the amendments made in the Central Act is to supersede the majority decision of the Supreme Court in Yaddalam Lakshminarasimhiah Setty's case [1965] 16 S.T.C. 231 (S.C.). These provisions were made expressly retrospective by the amending Act. Such being the position, the transaction with which the petitioners were concerned, became exigible to tax under the Central Act. To say that the refund made earlier stood validated cannot be accepted in view of the enunciation of this court reproduced above. The next question relates to the plea of limitation. The arguments before us is clearly based on the provisions of rule 38 of the State Rules. But in the petition, the basis for the plea has been section 35 of the Bombay Sales Tax Act, 1953. However, since the matter was argued, we propose to deal with it. The argument of Sri Srinivasan is that every order of rectification made under rule 38 gets merged or relates back to the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him were Yaddalam Lakshminarasimhiah Setty Sons v. State of Mysore [1962] 13 S.T.C. 583., Mysore Silk House v. State of Mysore[1962] 13 S.T.C. 597., and Peirce Leslie Co. v. State of Mysore (S.T.R.P. Nos. 63 and 64 of 1963). He proceeded to argue that the decision of the Supreme Court in Yaddalam Lakshminarasimhiah Setty's case [1965] 16 S.T.C. 231 (S.C.)., did not interpret the provision of section 8 of the Central Act and the decision thereunder turned on the interpretation of section 9. We are unable to accept this argument of Sri Srinivasan, in view of the decision of the Supreme Court in Civil Appeals Nos. 1228 and 1229 of 1969 decided on 14th August, 1969 (State of Kerala v. P.P. Joseph Co. [1970] 25 S.T.C. 483 (S.C.),. Furthermore, such an argument cannot be accepted in view of section 6(1A) of the amending Act of 1969, which clearly makes inter-State sales chargeable to tax under the Act with retrospective operation. But it is submitted by Sri Srinivasan that the non obstante clause occurring in section 8(2A) as amended clearly nullifies the effect of section 6(1A). He, therefore, submits that the amending Act has not in any manner affected the operation of the exemp ..... 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