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TMI Blog1992 (10) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 8360, W.P. (Civil) No. 8361, W.P. (Civil) No. 8362, W.P. (Civil) No. 8363, W.P. (Civil) No. 8364, W.P. (Civil) No. 8365, W.P. (Civil) No. 8366, W.P. (Civil) No. 8367, W.P. (Civil) No. 8368, W.P. (Civil) No. 9610, W.P. (Civil) No. 9611, W.P. (Civil) No. 9612, W.P. (Civil) No. 9613, W.P. (Civil) No. 9614, W.P. (Civil) No. 9615, W.P. (Civil) No. 9616, W.P. (Civil) No. 9617, W.P. (Civil) No. 9618, W.P. (Civil) No. 9619, W.P. (Civil) No. 9620, W.P. (Civil) No. 9621, W.P. (Civil) No. 9622, W.P. (Civil) No. 9623, W.P. (Civil) No. 9624, W.P. (Civil) No. 9625, W.P. (Civil) No. 9626, W.P. (Civil) No. 9627, W.P. (Civil) No. 9628, W.P. (Civil) No. 9629, W.P. (Civil) No. 9630 of 1982, W.P. (Civil) No. 947, W.P. (Civil) No. 948, W.P. (Civil) No. 949, W.P. (Civil) No. 950, W.P. (Civil) No. 951, W.P. (Civil) No. 952, W.P. (Civil) No. 953, W.P. (Civil) No. 954, W.P. (Civil) No. 955, W.P. (Civil) No. 956, W.P. (Civil) No. 957, W.P. (Civil) No. 958, W.P. (Civil) No. 959, W.P. (Civil) No. 960, W.P. (Civil) No. 3698, W.P. (Civil) No. 3699, W.P. (Civil) No. 3700, W.P. (Civil) No. 3701, W.P. (Civil) No. 3702, W.P. (Civil) No. 3703, W.P. (Civil) No. 3704, W.P. (Civil) No. 3705, W.P. (Civil) No. 3706, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11, C.A. Nos. 3912, C.A. Nos. 4202, C.A. Nos. 4203, C.A. Nos. 4204, C.A. Nos. 4205, C.A. Nos. 4302, C.A. Nos. 4737 of 1991, C.A. Nos. 70, C.A. Nos. 1280, C.A. Nos. 1281, C.A. Nos. 1282, C.A. Nos. 1283 of 1992, S.L.P. (Civil) No. 1045 of 1989, T.C. (Civil) No. 220 of 1988 T.V.S.N. Chari and Ms. Suruchi Aggarwal, Advocates, for the respondent in W.P. Nos. 655 to 659 of 1983, C.A. Nos. 10753 to 10761 of 1983 (State of Andhra Pradesh). B.K. Mehta, Senior Advocate (Meenakshi Arora and Anip Sachthey, Advocates, with him), for the respondents (State of Gujarat and others) in the Gujarat matters. R.R. Aggarwal, Senior Advocate (S. Ganesh, Advocate, and Ravinder Narain and S. Sukumaran, Advocates, of J.B. Dadachanji and Co., with him), for the appellants in C.A. Nos. 1280 to 1283 of 1992. B. Kanta Rao, Advocate, for the petitioner in W.P. Nos. 655 to 659 of 1983. Mrs. Janaki Ramachandran, Advocate, for the appellant in C.A. No. 10761 of 1983. Dushyant Dave, Advocate, and K.J. John and Dipa Dixit, Advocates of Swarup John and Co., for the appellants in certain appeals from Gujarat. A. Subba Rao, for the appellant in C.A. No. 1920 of 1981. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal note, its effect is the imposition of a liability to purchase tax on certain transactions. This liability is attracted in respect of goods, which are liable to tax at the point of sale to the consumer. In other words, the goods in question as such have run through their gamut of sales in the State. There will be no more sales in the State of the goods in that form, which can be taxed by the State, whether intrastate or inter-State, or in the course of export. Such goods are then made liable to tax in the hands of a purchaser dealer-cum-consumer either because he purchases them from a registered dealer by whom tax is not payable or because he purchases them from a person other than a registered dealer, i.e., a person who is not accessible to the Revenue, whose sales cannot be easily verified or from whom tax may not be easily recovered. To put it differently, since the tax is at the point of sale to the consumer, the Legislature, in order to ensure that goods do not escape tax in the State altogether, made the purchaser liable in respect of the last sale in the State of the goods in question, if otherwise the sales of the goods have not borne tax earlier in the State. This, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the provisions of section 15-B, inserted by a retrospective amendment of 1990, are somewhat different. Cutting out certain words not relevant in the present context, it provides that where a dealer, being liable to pay tax under the Act, purchases any taxable goods and uses them in the manufacture of taxable goods, a purchase tax will be levied on the turnover of such purchases. Rule 42-E, which was also framed with effect from May 1, 1990, provides that, where the assessee is a registered dealer and the goods manufactured by him have been sold in the State of Gujarat, he will be entitled to relief in respect of the purchase tax levied under section 15-B. Here again, it is argued, the provision is tainted because it refers to manufacture of the purchased goods and the rule ensures that no purchase tax is levied if the manufactured goods are sold in the State itself; in other words, the levy comes in only if they are consigned outside the State, attracting Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71. It will be seen at once that the three provisions under consideration vary from one another. Section 3-AAAA of the U.P. Act does not make the tax conditional on the use or consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is to tax, at purchase point, a class of goods, viz., goods purchased by a manufacturer. It has no concern, unlike the A.P. or Haryana Acts, with what he does with the manufactured goods. Presumably the idea is that the manufacturer is able to profit by adding value to the purchased raw material by utilising the infrastructure, fillips or facilities provided in the State to encourage setting up of industries therein and so can afford to pay tax on the purchased raw materials. The concession provided by rule 42E is an independent provision relieving him and the public consuming the manufactured goods of additional burden where such goods are sold inside the State and get taxed on the added value. In my opinion, there is considerable force in the substance of the contention of these States that these provisions only impose a tax on purchases. The marginal title to the provisions indicates that their direct purpose is to levy a tax on purchases effected in the State in certain circumstances. The tax is couched as a tax on all goods (in U.P.) and on raw or processing materials and consumable stores (in the State of Gujarat). It is designated as a purchase tax. It is levied on the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased from a person other than a registered dealer, the tax at the sales point may escape actual taxation for many reasons: such person may not be a dealer at all or, being an unregistered dealer, the State may not be able to ascertain his whereabouts and ensure that he is taxed or that the tax is collected. In cases where no sales tax is paid at the point of sale, it becomes necessary for the State Legislature to provide that the tax will be met by the purchaser. Invariably in such cases the legislations attach levy of tax to the last purchase made in the State, of a particular item of goods. Of course, the legislation could have simply said that the last purchase in the State will attract tax unless the tax is payable or has been paid at one of the earlier stages of sale and could not have been objected to. But that type of legislative wording might lead to difficult questions as to the definition of the expression "last purchase". That is why the section imposing purchase tax is worded in the manner in which it has been worded in the Andhra and Haryana Acts. As pointed out by the learned counsel for the assessees in the U.P. cases, a person can be said to be the last purchaser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to levy a tax on sales or purchases cannot include a right or power to tax goods at the point of their first sale in the State or their last purchase in the State? The mere fact that the purchase cannot be characterised as a last purchase except by reference to the subsequent utilisation of those goods cannot mean that the taxable event is not the purchase but something else. What we are really concerned with in deciding the question of constitutional validity of the levy of a sales tax is to pose the question: "Is the tax levied one with reference to the sale or purchase of goods." The ambit of the power to levy a tax in respect of sale of goods is very wide and will cover any tax which has a nexus with the sale or purchase of goods including a last purchase in the State. This I think is a more appropriate test to be applied in these cases rather than the test of "taxable event" which is somewhat ambiguous in the context. I am not inclined to agree that a tax on the sale or purchase of goods will cease to be so merely because the determination of its character as a last purchase would depend upon certain subsequent events which may be spread over a subsequent period of time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruth wherever it may lead: and courageous enough to acknowledge his errors'." For the reasons abovementioned, I agree with my learned brother and hold that the impugned provisions under all the three enactments are intra vires the powers of the concerned State Legislature. B.P. JEEVAN REDDY, J.-Validity of provisions of several States sales tax enactments imposing purchase tax fall for our consideration in this group of appeals and writ petitions. Initially the matters arising from Andhra Pradesh (Writ Petitions Nos. 655--669 of 1983 Hotel Balaji and others v. State of Andhra Pradesh and Civil Appeal Nos. 10753 to 10757 of 1983 Hindustan Milkfood Manufacturers Ltd. v. State of Andhra Pradesh) came up for hearing. During the course of hearing, counsel for the petitioners/appellants relied upon the decision of this Court in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71; [1990] 2 SCC 71 whereas the counsel for the State of Andhra Pradesh challenged the correctness of the said decision and pleaded for reconsideration of the said judgment. It was then brought to our notice that a large number of matters coming from different States raising, inter alia, the question relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealers (who are necessarily manufacturers), provided the goods (raw material) purchased by them fell in Schedule II or III (other than prohibited goods). Section 15-B was introduced by Amendment Act of 1986. It provided for levy of an additional purchase tax on raw material purchased by a manufacturing dealer in case he used the said raw material for the manufacture of other goods which he despatched to his own place of business or to his agent's place of business situated outside the State but within India. By an Amendment Act made in 1987, the section was substituted. There was, however, no substantial change in the section. Following upon the decision of this Court in Goodyear [1990] 76 STC 71; [1990] 2 SCC 71, a batch of writ petitions was filed in the Gujarat High Court challenging the validity of section 15-B on the ground that in truth and effect it levied a consignment tax and, hence was outside the competence of the State Legislature. While the said writ petitions were pending, section 15-B was substituted by an Ordinance being Ordinance No. 3 of 1990 issued on April 20, 1990. Subsequently, the Gujarat Sales Tax Amendment Act 6 of 1990 was enacted in terms of and replacing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mehta, learned counsel appearing for the State of Gujarat that the legislative competence of the Gujarat Legislature to enact section 15-B ought to be determined on its own language and not with reference to a rule made by the Government of Gujarat as the delegate of the Legislature. He submitted that on its own language, section 15B levies a pure and simple purchase tax on raw material purchased by a manufacturer. It is unconcerned with what happens to the manufactured goods. For the purpose of section 15-B, it is immaterial whether the manufactured goods are sold inside the State or despatched to a place outside the State of Gujarat or are dealt with or disposed of otherwise. The principle of Goodyear [1990] 76 STC 71; [1990] 2 SCC 71 has absolutely no application to this provision. Counsel also submitted that when the tax is upon the purchase price of the raw material and is relatable to the act of purchase, it cannot be held to be an excise duty which is levied on the act of manufacture and is levied with reference to the value of such manufactured goods. For a proper appreciation of the contentions arising herein it would be appropriate to notice a few relevant provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "15-A. Purchase tax payable on purchases of goods by certain dealers.- Where- (i) a recognised dealer purchases any goods specified in Schedule II or III other than prohibited goods, under a certificate given by him under clause (B) of sub-section (1) of section 13, or (ii) a commission agent holding permit purchases any goods specified in Schedule II or III other than prohibited goods on behalf of his principal who is recognised under a certificate given by him under clause (C) of sub- section (1) of section 13,- there shall be levied a purchase tax on the turnover of such purchase at the rate of two paise in the rupee." Since the amendment of this provision in 1992 is also not retrospective, it is unnecessary to notice the same. We may now set out section 15-B both as it obtained prior to Amendment Act 6 of 1990 and as substituted thereby. Prior to amendment, it read thus: "Where any dealer liable to pay tax under this Act uses any goods other than declared goods purchased by him or through commission agent as raw or processing materials or consumable stores (irrespective of whether such goods are prohibited goods or not) in the manufacture of taxable goods and desp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they apply, and further conditions specified below, grant him a drawback, set-off or as the case may be, refund of the whole of the purchase tax paid in respect of purchase of goods effected on and from the 1st April, 1986 used by him, as raw materials, processing materials, or consumable stores, in the manufacture of taxable goods. Conditions.-(1) The assessee is a registered dealer, (2) the goods purchased are taxable goods other than declared goods, (3) the said goods have been used by the assessee within the State as raw materials or processing materials or consumable stores in the manufacture of taxable goods, (4) the goods so manufactured have been sold by the assessee in the State of Gujarat." In view of the retrospective amendment of section 15-13, it may not be necessary to refer to section 15-B as it obtained prior to the 1990 amendment except to point out that in material particulars, it was similar to section 13-AA of the Bombay Sales Tax Act, which was considered in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 and held to be outside the legislative competence of the State Legislature. The correctness of the ratio in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se features which weighed with this Court in characterising the tax as one in the nature of a consignment tax. (This aspect has been dealt with in Part V). Since the said feature is absent in the impugned provision, we hold, agreeing with the High Court, that the tax imposed by section 15-B cannot be characterised as a consignment tax. The main contention of the appellants, however, is that section 15-B should not be read in isolation but in conjunction with rule 42-E which was introduced in the Rules simultaneously with the amendment of section 15-B and which rule indeed supplements section 15-B. They say that if both the provisions are read together, the effect and consequence is the same as that of section 15-B as it obtained prior to 1990 amendment, which means the tax is really upon the consignment of manufactured goods. We shall first notice what rule 42-E provides. It says that, in assessing the purchase tax levied under section 15-B, the assessee shall be granted a drawback, set-off or as the case may be, refund of the whole of the purchase tax paid in respect of purchase of goods effected on or after April 1, 1986, and which goods have been used by him as raw material, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve effect as if enacted in the statute such legislation may be referred to for the purpose of construing a provision in the statute itself. Where a statute does not contain such a provision, and does not confer any power to modify the application of the statute by subordinate legislation, it is clear that subordinate legislation made under the statute cannot alter or vary the meaning of the statute itself where it is unambiguous, and it is doubtful whether such legislation can be referred to for the purpose of construing an expression in the statute, even if the meaning of the expression is ambiguous." He says that this statement of law has been referred to with approval by Hegde, J., in his opinion in J.K. Steel Ltd. v. Union of India AIR 1970 SC 1173. Though the opinion of Hegde, J., is a dissenting one, he submits, the majority has not held to the contrary on this aspect. He also relies upon the English decisions referred to in the opinion of Hegde, J. and points out that no decision of this Court has expressed any opinion on the subject, a fact noted by Hegde, J. He commends the view taken by Hegde, J., for our acceptance. Sri. Mehta points out further that section 86 which co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... device, a stratagem to circumvent the decision of this Court or that it is an instance of fraud on power-what is sometimes referred to as "colourable legislation". That a Legislature is empowered to amend a provision to remove the defect pointed out by a court is well- accepted. So far as the Gujarat Act is concerned, it was never the subject- matter of an adverse decision either by this Court or the Gujarat High Court. Writ petitions were no doubt pending challenging the validity of section 15-B as it then stood. It was perfectly open to the Legislature to act to set its house in order to obviate a possible adverse verdict applying the ratio of Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71. The question is whether the provision now enacted, with retrospective effect, is beyond the legislative competence of the Gujarat Legislature? If not, no further question arises. So far as the retrospectivity given to section 15-B by the 1990 Amendment Act is concerned, it is hardly open to doubt in the light of several decision of this Court commencing from Ramkrishna v. State of Bihar [1963] 50 ITR 171; AIR 1963 SC 1667. This is not even a case where the old provision was struck down by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med. For the very same reasons, the argument that it is a use tax also fails. In essence, the provision is akin to the one considered by this Court in Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212. For the above reasons, the appeals and writ petitions are dismissed with no order as to costs. PART III: (UTTAR PRADESH) These civil appeals and writ petition are filed by the Tribeni Tissues Limited, Varanasi, Uttar Pradesh. The appeals are preferred against the judgment of a learned single Judge of the Allahabad High Court allowing Sales Tax Revisions Nos. 325, 327 and 328 of 1989 preferred by the Commissioner of Sales Tax, Uttar Pradesh, against the orders of the Sales Tax Appellate Tribunal. The assessment years concerned are 1978-79 to 1981-82. The appellant is a dealer registered under the U.P. Sales Tax Act, having an office at Varanasi. It has a paper mill at Calcutta. The appellant purchases sun hemp, raw jute, old hemp rope cuttings, old jute rope cuttings and jute cuttings, etc., at Varanasi and sends them to the paper mill at Calcutta for being used as raw material. These purchases are made by the appellant from farmers, "kabadis" and other person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such date as may be notified in that behalf, so however, that the rate does not exceed seven per cent." [The goods concerned herein, according to both the parties, fall within sub-section (2-A) of section 3-A]. The State Government issued a Notification dated May 30, 1975, in terms of and as contemplated by the proviso to sub-section (2-A) of section 3-A declaring that with effect from June 1, 1975, the turnover in respect of goods specified in column (2) of the Schedule to the notification shall be liable to tax at the point of sale and at the rate specified respectively in columns (3) and (4) thereof. The Schedule, in so far as relevant may be set out: "SCHEDULE 'M' stands for sale by manufacturer in Uttar Pradesh. 'I' stands for sale by the importer in Uttar Pradesh. ----------------------------------------------------------------------------- Sl.No. Description of goods Point at which Rate of tax tax shall be levied -------------------------------------------------------------------------------- I II III IV -------------------------------------------------------------------------------- (Items Nos. I to 14 omitted as unnecessary.) 15. Old, discarded, unserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases any goods liable to tax at the point of sale to consumer- (a) from any registered dealer in circumstances in which no tax is payable by such registered dealer, shall be liable to pay tax on the purchase price of such goods at the same rate at which, but for such circumstances, tax would have been payable on the sale of such goods; (b) from any person other than a registered dealer, whether or not tax is payable by such person, shall be liable to pay tax on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods. (2) Exemption shall be granted in the tax payable under sub- section (1) to the extent of the amount of tax,- (a) to which the goods purchased from a registered dealer have already been subjected or may be subjected under any provision of this Act or the Central Sales Tax Act, 1956; (b) already paid in respect of the goods purchased from any person other than a registered dealer; (c) on the sale of goods liable to tax exempted under section 4-A; (d) to which the sale of dressed hides and skins (or tanned leather) and ginned cotton obtained from raw hides and skins and raw cotton so purchased or rice obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 which according to us does not represent the correct position in law as explained in Part V. Coming to section 3-AAAA as it now stands, an analysis of the section yields the following ingredients: A. (i) A dealer who purchases any goods liable to tax at the point of sale to the consumer, (ii) from any registered dealer in circumstances in which no tax is payable by such registered dealer, (iii) the purchasing dealer shall be liable to pay tax on the purchase price of such goods at the same rate at which the tax would have been payable on the sale of such goods. B. (i) A dealer who purchases any goods liable to tax at the point of sale to consumer, (ii) from any person other than a registered dealer, whether or not such person is liable to pay the tax on such sale, (iii) the purchasing dealer shall be liable to pay tax on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods. C. The purchasing dealer is, however, entitled to be exempted from the tax payable under the above two heads to the extent of the amount of tax mentioned in clauses (a), (b), (c) and (d) of sub-section (2). Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, unable to see any room for contending that the tax imposed by the said section is in the nature of consignment tax or a use or consumption tax. Simply because the petitioner chooses to take the goods purchased by him out of the State, in the same form and condition or otherwise, for being used as raw material in his factory at Calcutta, makes no difference to the levy. The validity of the levy cannot depend upon what a particular dealer or person chooses to do with the goods. It was argued for the petitioner that sub-section (2) of section 3-AAAA places a heavy and uncalled for burden upon the purchasing dealer; that it is not practicable for the purchaser to establish that the selling person (other than the registered dealer) has paid the tax or not. It is submitted that the petitioner purchases his goods from hundreds of persons who are not registered dealers and it cannot reasonably be expected of the petitioner to gather the particulars of or from all such persons. We are unable to appreciate this contention. A person other than a registered dealer is not amenable to the discipline of the Act. He cannot indeed collect any tax [section 8-A(2)] and, therefore, will not, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate trade and commerce; 3.. Despatch of the goods out of the territory of India pursuant to a contract of sale, i.e., despatch in the course of an export sale. These then are the activities or transactions that constitute the taxable events on the happening of which the tax would be immediately attracted, that is to say, the tax in question becomes exigible at these points. Once these points are reached the possibility of the sale of goods purchased within the State or in the course of inter-State trade and commerce in the same form and condition, shall stand excluded. The fourth and the last condition envisaged by section 3-AAAA set out hereinabove necessary for attracting the levy would also stand fulfilled. It is only on the happening of these events that the taxing authority can reach the conclusion that the purchasing dealer has become liable under section 3-AAAA." With respect we find ourselves unable to agree with the above under- standing of the section. All that the section provided was: (i) where the goods liable to tax at the point of sale to the consumer are sold to a dealer (ii) in circumstances in which no sales tax is payable by the seller and (iii) the purchasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titions Nos. 655 to 669 of 1983 are filed by Hotel Balaji and 14 other hotels/restaurants for issuance of a writ, order or direction directing the respondents, viz., the State of Andhra Pradesh and its sales tax authorities not to levy and collect purchase tax on milk at 4 per cent under section 6-A as also the surcharge tax at 10 per cent of the tax. According to the petitioners, such a levy violates article 14 as also the fundamental right guaranteed to them by sub-clause (g) of clause (1) of article 19 of the Constitution. Civil Appeals Nos. 10753 to 10757 of 1983 are directed against the judgment and order Reported as Hindustan Milkfood Manufacturers Ltd. v. State of Andhra Pradesh in [1982] 51 STC 1 (AP). of a Division Bench of the Andhra Pradesh High Court upholding the validity of section 6-A of the Andhra Pradesh General Sales Tax Act. The case of the petitioners in the writ petitions is this: They purchase the milk required by them both from registered dealers as well as persons other than registered dealers. The authorities are collecting purchase tax at 4 per cent under section 6-A from the petitioners which is illegal in view of the fact that the sale of fresh milk is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh but also in other States of the country. It has an office at Dhawaleshwaram in East Godavari District of Andhra Pradesh. It is registered as a dealer under the Act. In the course of their assessment proceedings for the assessment year 1979-80 (among other assessment years) the appellant contended that milk having been exempted by virtue of a notification issued under section 9 is not taxable and that levy of purchase tax is incompetent. They questioned the constitutionality of section 6-A. The assessing authority overruled the said objections and levied the purchase tax on the turnover of milk purchased by the appellant. The matter was brought to the High Court which, as stated above, negatived the challenge to the constitutionality of the provision. So far as the exemption notification in G.O. Ms. No. 1091 dated June 10, 1957, is concerned, it must be noticed that what was exempted thereunder was the tax payable on the "sale of fresh milk sold by dealers exclusively dealing in them". So far as agriculturists are concerned, they are not dealers at all by virtue of explanation 11 to the definition of "dealer" contained in clause (e) of section 2. The notification has, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to purchase aforesaid at the same rate at which but for the existence of the aforementioned circumstances, the tax would have been leviable on such goods under section 5 or section 6." The section has been amended in some particulars by the Amendment Act 18 of 1985 but these amendments do not make a difference to the nature or character of the tax. Be that as it may, we may as well set out the section as it stands now, in view of the fact that the validity of the section as such is questioned before us. It reads: "6-A. Levy of tax on turnover relating to purchase of certain goods.- Every dealer, who in the course of business- (i) purchases any goods (the sale or purchase of which is liable to tax under this Act) from a registered dealer in circumstances in which no tax is payable under section 5 or under section 6, as the case may be, or (ii) purchases any goods (the sale or purchase of which is liable to tax under this Act) from a person other than a registered dealer, and (a) consumes such goods in the manufacture of other goods for sale or consumes them otherwise, or (b) disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng taxed. Two examples, each illustrating one of the two situations envisaged by the section may be given: (a) Andhra Pradesh Dairy Development Corporation, a registered dealer, is exempted from paying the tax on sale of pasteurised milk. The purchaser of pasteurised milk from the Corporation is taxed provided he satisfies one of the conditions specified in clauses (i) to (iii) Presumably clauses (i) to (iii) refer to clauses (iii), (iv) and (v) of A and B as analysed by the Supreme Court: See page 134 supra.-Ed. mentioned in the section, thereby becoming the last pur- chaser in the State of such milk. (b) Fresh milk is taxable at sale point. But when it is sold by a farmer/agriculturist raising cattle on lands held by him, he cannot be taxed because he is not a dealer. The purchaser is taxed in such cases provided he satisfies one of the conditions specified in clauses (i) to (iii) in the section, thereby becoming the last purchaser in the State of such milk. It would, therefore, be clear that the real object of the clauses (i) to (iii) Presumably clauses (i) to (iii) refer to clauses (iii), (iv) and (v) of A and B as analysed by the Supreme Court: See page 134 supra.-E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, the goods sold were those mentioned in Schedule I they were taxable at a single point, viz., at the point of sale and at the rate prescribed in the said Schedule. Similarly, if the goods fell in the Second Schedule they too were taxable only at one point, namely, the point of purchase at the rate prescribed [sub-section (2)]. Schedule III comprises of declared goods while Schedule IV sets out goods which are totally exempted from tax under section 8 of the Act. Schedule V deals with jaggery and Schedule VI with liquors. In other words, goods which did not fall in any of the Schedules I to VI, fell under sub-section (1) and were taxed as general goods. In this sense, fresh milk which is not mentioned in any of the Schedules I to VI was chargeable as general goods under sub-section (1) of section 5. By Amendment Act 4 of 1989 the entire scheme of section 5 has been changed. The present section says that the goods mentioned in Schedules I to VII shall be taxed at the point and at the rate specified therein. Schedule VII which has been inserted by the very same Amendment Act is in the nature of a residuary Schedule; the goods which do not fall in any of the Schedules I to V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As mentioned earlier, counsel for all the assessees in these matters strongly rely on the decision of this Court in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 which invalidated a purchase tax levied by the Haryana and Maharashtra Sales Tax Acts. We may, therefore, notice this decision in some detail. What precisely is the ratio of Goodyear. Provisions relating to purchase tax in the Haryana Sales Tax Act and Bombay Sales Tax Act fell for consideration in this case. Section 9 of the Haryana Act, before it was amended by the Haryana General Sales Tax (Amendment and Validation) Act, 1983, read as follows: "9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and- (a) uses them in the State in the manufacture of,- (i) goods specified in Schedule B or (ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter-State trade or commerce or within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956, in the course of export out of the territory of India, (b) exports them, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in the same condition in which they were purchased, the tax shall be levied, charged and paid at the station of despatch or at any other station before the goods leave the State and the tax so levied, charged and paid shall be provisional and the same shall be adjustable towards the tax due from the dealer on such purchase as a result of assessment or reassessment made in accordance with the provisions of this Act and the rules made thereunder on the production of proof regarding the payment thereof in the State." Again a batch of writ petitions was filed questioning the validity of the amended provision which challenge too was upheld by the High Court in its decision in Bata India Ltd. v. State of Haryana [1983] 54 STC 226. The main ground upon which the High Court allowed the writ petitions was that mere despatch of goods to a place outside the State in any manner other than by way of sale in the course of inter-State trade or commerce is synonymous with or is in any case included within the ambit of consignment of goods to the person making it or to any other person in the course of inter-State trade or commerce as specified in article 269(1)(h) and entry 92-B of List I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find out the true nature of the tax. Analysing the section, if one looks to the purchase tax under section 9, one gets the conclusion that the section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods, losing its original identity, and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created". Accordingly, the learned Judge held, the tax is in the nature of a consignment tax which the Parliament alone could impose and not the State Legislature. The correctness of the said view is questioned by the learned counsel for the State of Andhra Pradesh and other counsel appearing for the State Governments. The question for our consideration is whether the learned Judge was not right in holding that the taxable event under the section is not the purchase of goods used in the manufacture of end-products but the despatch of manufactured goods to out-State destinations. The other provision considered in the said decision is the one contained in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rji, J., Ranganathan, J., made a few pertinent observations in his separate opinion. The learned Judge opined that both section 9 of the Haryana Act and section 13-AA of the Bombay Sales Tax Act "purport only to levy a purchase tax" and further that "the tax, however, becomes exigible not on the occasion or event of purchase but only later. It materialises only if the purchaser (a) utilises the goods purchased in the manufacture of taxable goods and (b) despatches the goods so manufactured (otherwise than by way of sale) to a place of business situated outside the State. The Legislature, however, is careful to impose the tax only on the price at which the raw materials are purchased and not on the value of the manufactured goods consigned outside the State. The State describes the tax as one levied on the purchase of a class of goods, viz., those purchased in the State and utilised as raw material in the manufacture of goods which are consigned outside the State otherwise than by way of sale". The learned Judge opined: "to me it appeared as plausible to describe the levy as a tax on purchase of goods inside the State (which attaches itself only in certain eventualities) as to descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not sold within the State of Haryana, but yet disposed of within the State, no tax is payable on such disposition; similarly, where manufactured goods are despatched out of State as a result of an inter-State sale (sic) or export sale, no tax is payable on such sale. Similarly again where such manufactured goods are taken out of State to manufacturers' own depots or to the depots of his agents, no tax is payable on such removal. Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 takes only the last eventuality and holds that the taxable event is the removal of goods from the State and since such removal is to dealers' own depots/agents outside the State, it is consignment, which cannot be taxed by the State Legislature. With the greatest respect at our command, we beg to disagree. The levy created by the said provision is a levy on the purchase of raw material purchased within the State which is consumed in the manufacture of other goods within the State. If, however, the manufactured goods are sold within the State, no purchase tax is collected on the raw material, evidently because the State gets larger revenue by taxing the sale of such goods. (The value of manufactured good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the manufacturing dealer's depots/agents outside the State of Haryana. But does that change the nature and character of the levy. Does such postponement-if one can call it as such-convert what is avowedly a purchase tax what is on raw material (levied on the purchase price of such raw material) to a consignment tax on the manufactured goods? We think not. Saying otherwise would defeat the very object and purpose of section 9 and amount to its nullification in effect. The most that can perhaps be said is that it is plausible (as pointed out by Ranganathan, J., in his separate opinion) to characterise the said tax both as purchase tax as well as consignment tax. But where two interpretations are possible, one which sustains the constitutionality and/or effectuates its purpose and intendment and the other which effectively nullifies the provision, the former must be preferred, according to all known canons of interpretation. This is also the view expressly approved by Mukharji, J. in his opinion, as pointed out hereinbefore. In para 71 (page 110 of STC) of his opinion, the learned Judge states: "it is well-settled that reasonable construction should be followed and literal construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the goods purchased are consumed, disposed of or despatched, the tax is really one in the nature of consumption tax or use tax, but not sales tax. This argument was answered by the learned Judge in the following words: "According to me, this contention is based on a misconception of the scope of taxation on the sale of goods. It is true that sales tax is a tax imposed on the occasion of the sale of goods. But it has no reference to the point of time at which the sale or purchase takes place. It refers to the connection with the event of purchase or sale and not the point of time at which such purchase or sale takes place. To read it otherwise would render any retrospective imposition of sales tax invalid as in every such case the tax would not be one which arises on the occasion of sale. By the same logic, it would not be possible to tax any goods at the last purchase point in the State, for the last purchase point in regard to any goods could be determined only when the goods are sold later and not when the goods are purchased. On the same reasoning as urged by counsel, one should say in such a case that since the goods are taxed only when the goods are sold outside the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is repugnant to this cardinal canon of interpretation." In the light of the above scheme of section 9, it would not be right, in our respectful opinion, to say that the tax is not upon the purchase of raw material but on the consignment of the manufactured goods. It is well- settled that taxing power can be utilised to encourage commerce and industry. It can also be used to serve the interests of economy and promote social and economic planning. Section 9 of the Haryana Act and section 13-AA of the Bombay Act are intended to encourage the industry and at the same time derive revenue. It is also not right to concentrate only on one situation, viz., consignment of goods to manufacturer's own depots (or to the depots of his agents) outside the State. Disposal of goods within the State without effecting a sale also stands on the same footing, an instance of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 322 US 327; 88 L Ed. 1305 and C.G. Naidu and Co. v. State of Madras AIR 1953 Mad. 116 at 127-128; [1952] 3 STC 405. He argued that the State Legislature could not levy a use tax which was essentially different from a purchase tax. The assumption of counsel that section 21 levies a use tax is not well-founded. The taxable event under section 21 is the purchase of goods and not the use or enjoyment of what is purchased. The constitutional implication of a use tax in American law is entirely irrelevant......... To appreciate another argument of Mr. Chatterjee, it is necessary to refer to a few facts. It appears that paragraph 21 of the Bill published in the Gazette on March 3, 1960, preliminary to the passing of Act No. 45 of 1961 provided for a levy of a cess on the entry of cane into the premises of a factory for use, consumption or sale therein. On December 13, 1960, this Court in Diamond Sugar Mills Ltd. v. State of Uttar Pradesh [1961] 3 SCR 242, struck down a similar provision in the U.P. Sugarcane Cess Act, 1956, on the ground that the State Legislature was not competent to enact it under entry 52, List II, as the premises of a factory was not a local area within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of raw material purchased by a manufacturer. In certain situations (the three situations mentioned above, viz., sale of manufactured goods within the State, inter- State sale and export sale of manufactured goods) it is waived. In other cases, it is not. It is argued for the assessees that apart from Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 a Bench of three Judges of this Court has independently approved and affirmed the correctness of the ratio and reasoning in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71. Reference is to Mukerian Papers Ltd. v. State of Punjab [1991] 81 STC 152 (SC); [1991] 2 SCC 580. The case arose under the Punjab General Sales Tax Act and the provision which fell for interpretation was section 4-B. It levied purchase tax on the raw material used in the manufacture of goods which in turn are sold outside the State otherwise than by way of sale in the course of inter- State trade or commerce or in the course of export out of the territory of India. The argument for the assessee/appellant was "that the main question of law involved in this case is concluded by the decision of this Court in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstance. So far as the decision in Murli Manohar & Co. v. State of Haryana [1991] 80 STC 79 (SC); [1991] 1 SCC 377 is concerned, it arose under the Haryana General Sales Tax Act and explains the meaning of export sale referred to in section 9(1)(b) of the Act. There is no discussion in this decision about the point at issue before us. The same is the position under section 13-AA of the Bombay Sales Tax Act. The said provision, properly analysed, yields the following ingredients: (i) where a dealer who is liable to pay tax under this Act purchases any goods specified in Part I of Schedule C either directly or through commission agent, from a person who is or is not a registered dealer and (ii) uses such goods in the manufacture of taxable goods and (iii) despatches the goods so manufactured to his own place of business or to his agent's place of business situated outside the State within India, (iv) such dealer shall pay, in addition to the sales tax/purchase tax paid or payable or levied or leviable, as the case may be, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture. Here again it may be notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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