TMI Blog1979 (9) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... a step preliminary to manufacture but is not part of manufacture. Maybe, in some cases tax on such purchase and duty on manufacture therewith are so close that "thin partition do their bounds divide" but how can we obliterate those bounds and telescope the two. - Civil Appeal No. 712 of 1972, Civil Appeal No. 962, 963, 964 of 1972, 1013 of 1972, 1063, To 1065 of 1972, 1066, 1067 of 1972, 1140, of 1971, 1160 of 1972, 1329, 1330 of 1972, 1367 of 1972, 1409 of 1972, 1415 of 1972, 1598 of 1972, - - - Dated:- 20-9-1979 - CHANDRACHUD Y.V., KRISHNA IYER V.R., UNTWALIA N.L., SHINGHAL P.N. AND KOSHAL A.D. JJ. Shanti Bhushan, Senior Advocate (C.A. No. 1409 of 1972), O.P. Malhotra, Senior Advocate (C.A. No. 1415 of 1972), R.K.P. Shankar, Advocate (C.A. Nos. 1013 and 1409 of 1972), H.K. Puri and V.K. Bahl, Advocates, for the appellants in C.A. Nos. 1013, 1409 and 1415 of 1972. O.P. Rana and R. Ramachandran, Advocates, for the respondents. Yogeshwar Prasad, Senior Advocate, and Mrs. Rami Chhabra and Mrs. S. Bagga, Advocates, for the appellants in C.A. No. 1367of 1972. Shanti Bhushan, Senior Advocate (C.A. No. 712 of 1972), P.R. Mridul, Senior Advocate (C.A. No. 962 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on this levy for which the common man eventually pays heavily. Uttar Pradesh, which grows sugarcane and runs sugar mills in the private sector, hit upon a tax on the purchase of cane by millers, who manufactured sugar and khandsari, at differential rates, but it is a heritage from the thirties. A little legislative history, mixed with tentative inferences, illuminates the legal controversy since the appellants' counsel set much store by this as an auxiliary circumstance. A broad brush projection of the fiscal story and background economy may now be attempted, although we regret that no authoritative material, beyond what can be culled from the High Court judgment, is forthcoming. We will make-do with it although litigants, especially in the battle-field of unconstitutionality, must produce the socioeconomic bio-data of challenged legislation, explaining the "how", the "why" and the "why not" of each clause lest lay minds, lost in legal tuning, should miss meaningful sound and social sense which experts may explain. Law cannot go it alone-nor lawyers. Many States in India grow sugarcane, all of which, save negligible quantities, suffer crushing and its sucrose content is reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity by the mills, their sugar production and quantum of profits, to the question of tax incidence, its equity and equality will be taken up by us later on. Prima facie, there is a cane-sucrose correlation for the State. Apart from it, the more the cane purchased, the more the profits spun; and the justice of fixing the tax tag on the weight of cane purchased argues itself. And what makes for just impost of the tax burden is the antithesis of arbitrariness. When the majority of the sugarcane States have imposed purchase tax by weight, not value, a reinforcement of sorts is added to this inference. The High Court observes, based on these data: "Prima facie, purchase tax by weight would ensure more stable revenue over the years than the purchase tax by the price of sugarcane, which rises and falls in a four years' cycle." This statement has not been upset by any facts placed before the court and ipse dixits of counsel, sans data, are airy economics. Another market eccentricity must be noticed. Business cycles of boom and slump have been the bane of the sorry sugar and sugarcane story of that State, and fiscal policy to stabilise a wobbling market economy has been presumably evo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Tariff Commission's Report, it is not possible to take the view that tax by weight is unfair and inequitable. And article 14 ensures to the citizen the basic principle on which rests justice under the law. It assures to the citizen the ideal of fairness (Corpus Juris Secundum, Vol. XVI-A, page 296). The petitioners have failed to discharge the heavy burden of proof." Abstract submissions flung from imagination do not reach the point of forensic take-off, if we may add. Tentatively, subject to further examination, the conclusion of the High Court commends itself to us: "The incidence of purchase tax by weight appears to be more related to the earning capacity of the assessee than the incidence of tax by price of sugar- cane." To clinch the issue, as it were, the High Court winds up: "The petitioners have not argued that the impugned provision is confiscatory in nature. I have already shown that tax by weight has got fairer relation to the production of sugar by an earning of a factory than tax by price. Consequently, no one can fairly complain that the impugned provision treats unequals as equals. Equal crushing attracts equal tax." We may comment by way of supplem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory mandate. Both the tax and the cess contemplated by the 1938 Act went by the maund and although the cess was to be levied from the seller he was allowed to recover it from the purchaser. The 1938 Act gave place to the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, which created a scientific scheme, created a fund, injected the concept of cane-growers' co-operatives and provided for levy of cess. The cess part of the Act was replaced by the U.P. Sugarcane Cess Act, 1956. We must remember that by now the Government of India Act, 1935, had ceased to exist and the Constitution of India had come vibrantly into being with the fundamental rights of Part III. The cess under the 1956 Act was attacked and fell victim to a constitutional challenge and this Court in the Diamond Sugar Mills case [1961] 3 S.C.R. 242, declared the Cess Act ultra vires. The consequence of this mortality was the incarnation of the U.P. Sugarcane (Purchase Tax) Act, 1961, which is being impeached as ultra vires in these appeals. When cess failed, the State would have been constrained to refund nearly half a hundred crores of rupees. Validation by parliamentary legislation in conformity with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions on the available materials supplemented by warrantable guesses, with a presumption in favour of constitutionality strengthened by the High Court's affirmance since the principal attack is based on article 14. Historically, the tax in question is a successor to the cess which was struck down, but jurisprudentially, the levies are different in character and attributes and constitutionally, the imposts derive from different legislative entries and have to be tested by different standards. In short, the Purchase Tax Act has to be judged on its own merits in the light of submissions of counsel. The anatomy of the Act, to the extent relevant, may now be envisaged. Section 3 is the charging section and creates a liability on the purchase of sugarcane payable by a factory owner or a unit owner. The rate is one rupee 25 paise per quintal and 50 paise per quintal for factories and units respectively. The taxing event is the purchase transaction by the owner of a factory or a unit. An option is provided for in the case of owners of units to pay tax on an assumed quantity prescribed by Government. This is obviously to simplify and to benefit owners of units who are presumably t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)]. Interest and penalty, appeal, prosecution and other consequential provisions find a place as usual but the basic challenge is to the charge of tax on three grounds. The charge is bad, firstly, because, argues counsel, it is, in its true character, a legislation in respect of a "controlled industry" and this power belongs exclusively to Parliament under entry 52 of List I (VII Schedule). The next submission to shoot down the measure is that the Act, masked as purchase tax, in essence asks for an excise duty on sugar manufacture and is, therefore, invalid as colourable legislation, seeking to achieve, on the sly, what it dare not do straight. Surely, excise duty falls under entry 84 of List I and the State Legislature cannot usurp that power. Even if the levy be a hybrid one, as Shri Malhotra made it out to be, it falls under entry 97 of List I, out of bounds for the State Legislature. The final shot fired to bring down the fiscal levy on the score of ultra vires is from the customary barrel of article 14. A multi-pronged attack, based on article 14, was launched. The levy cast equal burdens on unequals and so was invalid on the ground of discrimination. A tax, by this canon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der examination is, in a sense, an excise duty and not a purchase tax. We are somewhat surprised that the argument about the invalidity of the Act on the score that it is with respect to a "controlled industry" dies hard, despite the lethal decision of this Court in the Ch. Tika Ramji's case [1956] S.C.R. 393. Enlightened litigative policy in the country must accept as final the pronouncements of this Court by a Constitution Bench unless the subject be of such fundamental importance to national life or the reasoning is so plainly erroneous in the light of later thought that it is wiser to be ultimately right rather than to be consistently wrong. Stare decisis is not a ritual of convenience but a rule with limited exceptions. Pronouncements by Constitution Benches should not be treated so cavalierly as to be revised frequently. We cannot devalue the decisions of this Court to brief ephemerality which recalls the opinion expressed by Roberts, J., of the U.S. Supreme Court in Smith v. Allwright [1944] 321 U.S. 649 at 669. "that adjudications of the court were rapidly gravitating 'into the same class as a restricted railroad ticket, good for this day and train only'". Let us examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate trespassing upon the field of entry 52 in List I. Tika Ramji's case [1956] S.C.R. 393 at 414., gave short shrift to the submission that all sugarcane legislation linked to sugar factories was sugar legislation. Bhagwati, J., observed: "What we are concerned with here is not the wide construction to be put on the term 'industry' as such but whether the raw materials of an industry which form an integral part of the process are within the topic of 'industry' which forms the subject-matter of item 52 of List I as ancillary or subsidiary matters which can fairly or reasonably be said to be comprehended in that topic and whether the Central Legislature while legislating upon sugar industry could, acting within the sphere of entry 52 of List I, as well legislate upon sugarcane. The learned Judge stripped the argument naked and presented it for examination: "It was suggested that item 52 of List I comprised not only legislation in regard to sugar industry but also in regard to sugarcane which was an essential ingredient of the industrial process of the manufacture or production of sugar and was, therefore, ancillary to it and was covered within the topic. If legislation with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pieces of legislation enacted by the Centre and the State Legislature together, there was any repugnancy........." This Court further quoted Sulaiman, J., in Shyamakant Lal[1939] F.C.R. 193 at 212., to lend strength to this latter limb of reasoning, where the learned Judge had laid down the principle of construction in situations of apparent conflict: "When the question is whether a Provincial legislation is repugnant to an existing Indian law, the onus of showing its repugnancy and the extent to which it is repugnant should be on the party attacking its validity. There ought to be a presumption in favour of its validity, and every effort should be made to reconcile them and construe both so as to avoid their being repugnant to each other; and care should be taken to see whether the two do not really operate in different fields without encroachment. Further, repugnancy must exist in fact, and not depend merely on a possibility." Tika Ramji [1956] S.C.R. 393 at 414, 416-417, 422-423, 420-421, 427. notwithstanding, the contention was advanced by Shri Shanti Bhushan that "industry" was a pervasive expression, ambient enough to embrace raw materials used for the industry and so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. We discern nothing in this policy which legislates upon the sugar industry. Before we move on to the submission as to the nature of the levy being an excise duty, we may dispose of the little contention on alleged discrimination between sugar factories and khandsari units by the impost of differential rates of tax and the more serious contention founded on the breach of article 14 to the effect that when a purchase tax liability is computed by the weight of the case, as distinguished from its monetary value, there is an inevitable arbitrariness built into the texture of the scheme. If either of these submissions has substance, the tax in question must fall to the forces of articles 14, 19 and 13, especially article 14, article 19 coming in only consequentially or where expropriation ensues. Article 14, a great right by any canon, by its promiscuous forensic misuse, despite the Dalmia decision [1959] S.C.R. 279., has given the impression of being the last sanctuary of losing litigants. In the present case, the levy which is uniform on all sugarcane purchases, is attacked as ultra vires, on the score that the sucrose content of various consignments may vary from place to pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation upon a reasonable basis and what is reasonable is a question of practical details and a variety of factors which the court will be reluctant and perhaps ill-equipped to investigate. In this imperfect world perfection even in grouping is an ambition hardly ever accomplished. In this context, we have to remember the relationship between the legislative and judicial departments of Government in the determination of the validity of classification. Of course, in the last analysis courts possess the power to pronounce on the constitutionality of the acts of the other branches whether a classification is based upon substantial differences or is arbitrary, fanciful and consequently illegal. At the same time, the question of classification is primarily for legislative judgment and ordinarily does not become a judicial question. A power to classify being extremely broad and based on diverse considerations of executive pragmatism, the judicature cannot rush in where even the legislature warily treads." The further challenge must be clarified here. Counsel submitted that unequals were being treated equally by a uniform purchase tax where equality would have dictated classification a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually with reference to his turnover, which normally means the aggregate of the amounts of purchase prices. But the tax need not necessarily be levied on a dealer or by reference to his turnover. It may be levied on the occupier of a factory by reference to the weight of the goods purchased by him." Maybe, the discussion is brief but the conclusion is sound, and we concur. Tax on sale or purchase must be on the occurrence of a taxing event of sale transaction. Beyond that is left to the free play of the legislature, subject, of course, to the contra-indications about capricious, arbitrary or irrational features. It is a superstition, cultivated by familiarity, to consider that all sales tax must necessarily have nexus with the price of the commodity. Of course, price as basis is not only usual but also safe to avoid uneven, unequal burdens, although it is conceivable that a legislature can regard prices which fluctuate frequently, as too impractical to tailor the purchase tax. It may even be, in rare cases, iniquitous to link purchase tax with price, if more sensible bases can be found. Supposing a legislature classifies sales tax on the basis of human categories and reduces the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing them as apart from factories and we fail to appreciate the flaw in the scheme on this score. Reference to the K.T. Moopil Nair's case [1961] 3 S.C.R. 77., was made at the Bar to persuade us that unequals cannot be tortured into equality-a vice which stultifies the soul of article 14 as Anatole France exposed in his sardonic epigram that "the law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread". We are sure that equality has two sides, both important, and the Moopil Nair [1961] 3 S.C.R. 77., adverted to one of the facets. Nothing more can be squeezed out of that case. The inequality of situation, in the total conspectus of socio-economic facts and human condition, must be striking and the unjust equality the rule forces down on unequals must be glaring. In taxation, the many criteria of intrinsic intricacy and pragmatic plurality persuade the court, as a realist instrument and respecter of the other two branches, to allow considerable free play although never any play for caprice, mala fides or cruel recklessness in intent and effect. Shri Malhotra, counsel for some appellants, explored beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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