TMI Blog2002 (10) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... l much less unconstitutional and Mere similarity between section 9(1)(b) of the Haryana Act and section 4-B of the Punjab Act would not relieve a dealer of the liability to pay purchase tax on paddy as the scope of charging sections under the said Acts are different. In view of the above discussion, the appeals filed by the assessees under the Haryana Act are allowed in part and the appeals filed by the assessees under the Punjab Act are dismissed. - Civil Appeal No. 11174-11184 of 1995, - - - Dated:- 24-10-2002 - SYED SHAH MOHAMMED QUADRI AND RUMA PAL JJ. Civil Appeal No. 257, Civil Appeal No. 2220, Civil Appeal No. 2252, Civil Appeal No. 2253, Civil Appeal No. 2254, Civil Appeal No. 1581, Civil Appeal No. 1582, Civil Appeal No. 1583, Civil Appeal No. 1584, Civil Appeal No. 1585, Civil Appeal No. 1586, Civil Appeal No. 1587, Civil Appeal No. 1588, Civil Appeal No. 1589, Civil Appeal No. 1590, Civil Appeal No. 1591, Civil Appeal No. 1592, Civil Appeal No. 1593, Civil Appeal No. 1594, Civil Appeal No. 1595, Civil Appeal No. 1596, Civil Appeal No. 1597, Civil Appeal No. 1598, Civil Appeal No. 1599, Civil Appeal No. 1600, Civil Appeal No. 1601, Civil Appeal No. 1602, Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -- The judgment of the Court was delivered by SYED SHAH MOHAMMED QUADRI, J. -Leave is granted in the special leave petitions. 2.. The solution to the questions raised in this batch of cases turns on a true interpretation of the provisions of the Haryana General Sales Tax Act, 1973 (for short, "the Haryana Act")/the Punjab General Sales Tax Act, 1948 (for short, "the Punjab Act") in the light of the provisions of article 286 of the Constitution and the Central Sales Tax Act, 1956 (for short, "the CST Act"). 3.. For the sake of convenience, these cases can be divided into two groups: (A) The first consists of two categories of cases arising under the Haryana Act in respect of assessments for the period: (i) ending with October 14, 1990 and (ii) between October 15, 1990 and September 28, 1996; and (B) The second takes in cases arising under the Punjab Act. 4.. Mr. P. Chidambaram, the learned Senior Counsel appearing for the appellants, has piloted the arguments in the batch, which were adopted by other learned counsel appearing for the appellants in different appeals/writ petitions. The contentions of the learned counsel are twofold. The first being, sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Commissioner revising the assessments and, thus, dismissed the writ petitions. The appellants are in appeal, by special leave, before this Court challenging the legality of the judgment and order of the Full Bench See [1997] 104 STC 362. of the High Court. 6.. It needs to be noticed, at the outset, that in view of the provisions of sub-section (3) of article 246 read with entry 54 of List II of the Seventh Schedule to the Constitution, a State is competent to legislate authorising imposition of taxes on the sale or purchase of goods (other than newspaper), subject to the provisions of entry 92-A of List I. Under the said entry (92-A of List-I), the Parliament is competent to legislate authorising imposition of taxes on the sale or purchase of goods (other than newspaper), where such sale or purchase takes place in the course of inter-State trade or commerce. In other words, any Act passed by a State Legislature authorising imposition of taxes on sale or purchase of goods will be subject to the legislation made by the Parliament under entry 92-A of List I of the Seventh Schedule to the Constitution. 7.. A reference to article 286 of the Constitution of India would also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (29-A) of article 366. 9.. In exercise of the power conferred under clause (2) of article 286, the Parliament enacted the CST Act formulating principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export. Section 5 of the CST Act embodies the principles as to when a sale or purchase of goods is said to take place in the course of import or export. Sub-section (1) of section 5 says that a sale or purchase of goods shall be deemed to take place in the course of export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Sub-section (2) provides that a sale or purchase of goods shall be deemed to take place in the course of import of goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. Sub-section (3), which commences with a non obst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of sub-section (3) of section 5, the paddy and rice shall be treated as a single commodity; (d) each of the pulses referred to in clause (vi-a) of section 14, whether whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law." 11.. The provisions, quoted above, enumerate the restrictions and conditions in regard to tax on sale or purchase of declared goods within a State, which is defined in clause (c) of section 2 of the CST Act to mean the goods declared under section 14 to be of special importance in inter-State trade or commerce. It may be pointed out here that paddy and rice are enumerated in sub-clauses (i) and (ii) respectively of clause (i) of section 14 and they are, therefore, "declared goods". 12.. Reverting to section 15, clause (a) imposes two restrictions on the tax to be imposed on sale or purchase of declared goods inside the State: (1) an upper ceiling of four per cent on sale or purchase price of such goods and (2) such tax shall not be levied at more than one stage This second restriction has been deleted by the Finance Act No. 20 of 2002 w.e.f. 1-4-2002.. Clause (b) p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may, we shall now deal with the contentions of the learned Senior Counsel for the appellants/petitioners. 15.. It may be mentioned that after formation of the State of Haryana on November 1, 1966, it adopted the Punjab Act which was in force in the then composite State of Punjab. The Haryana Act was passed in the year 1973. Between 1982 and April, 1991, section 6 was amended as many as eight times. The last amendment of section 6 was by Ordinance No. 2 of 1990, which was promulgated on October 15, 1990 and later replaced by Haryana Act 4 of 1991 on April 16, 1991. By the said Act, the amended section 6 was given retrospective effect from May 27, 1971. It is unnecessary to refer to all the earlier amendments as they have no bearing on the issue under determination. Section 6, in so far as it is relevant for our purpose, as it stood after the last mentioned amendment, read thus: "Section 6: Incidence of taxation.-(1) Subject to other provisions of this Act, every dealer whose gross turnover during the year immediately preceding the 27th day of May, 1971, exceeded the taxable quantum, shall from the 27th day of May, 1971 and every other dealer shall, on the expiry of thirty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals exclusively in goods specified in Schedule "B"; and (b) a dealer who executes a sub-contract with a contractor. These are the only exemptions that section 6 speaks of, though section 13 confers power on the Government to grant exemption in specified cases. 18.. Here, it would be relevant to note that the said Haryana Act 4 of 1991, omitted section 9 of the principal Act, which, be it noted, is not retrospective. Consequently, in respect of the assessment years in question, section 6, as amended by Haryana Act 4 of 1991 as well as section 9 of the Haryana Act were on the statute book and this fact should be borne in mind while considering leviability of the purchase tax on the raw material (paddy) during the period ending with assessment year 1989-90. 19.. It is pertinent to read section 9 of the Haryana Act. Though section 9 was also amended on ten occasions between 1976 and 1991, for the present discussion, all those amendments are inconsequential. Section 9(1)(b) as on October 15, 1990, in so far as it is relevant, is extracted here: "Section 9: (1) Where a dealer liable to pay tax under this Act,- (a) ............... (b) purchases goods, other than those specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b). It is important to note that the aforementioned levy of purchase tax on the raw material would have no application when the manufactured goods are: (a) disposed of by way of sale in the State; (b) despatched to a place outside the State: (1) in the course of inter-State trade or commerce; or (2) in the course of export outside the territory of India within the meaning of section 5 of the CST Act. In other words, levy of purchase tax thereunder on the raw material is exempted if the manufactured goods are dealt with in the manner outlined in clauses (a) and (b) hereinabove. 22.. The exemptions contained in section 9(1)(b) are confined to cases of impost levied thereunder and not otherwise. In other words, where purchase tax is leviable on goods under section 6, and not under section 9(1)(b), a dealer cannot claim benefit of the exemptions mentioned in latter section. 23.. The rationale for the exemption of purchase tax on the raw material from the purchase tax in the aforementioned cases, is succinctly elucidated by Jeevan Reddy, J., speaking for a Bench of three learned Judges of this Court in Hotel Balaji's case [1993] 88 STC 98 (SC). (1993) Suppl 4 SCC 536 as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Haryana(2) (1993) Suppl 4 SCC 589. 25.. In these cases, in the light of the above discussion, we conclude that specific charging provision of section 9(1)(b) will be attracted as the assessee purchased paddy (which is not one of the goods specified in Schedule B), procured rice (manufactured goods) from the said paddy and exported rice outside the territory of India, on which no purchase tax was payable under the general charging provision of section 6 which is, inter alia, subject to the provisions of section 9. We have already held above that the assessees will not be liable to pay tax on the purchase of such paddy in view of the provisions of clause (b) of sub-section (1) of section 9 in the assessment years in question, or, for that matter, any assessment year ending before April 1, 1991. To the same effect is the view expressed by this Court in the cases of Murli Manohar [1991] 80 STC 79 (SC). (1991) 1 SCC 377, Hotel Balaji [1993] 88 STC 98 (SC). (1993) Suppl 4 SCC 536, and K.B. Handicrafts Emporium [1993] 90 STC 477 (SC). (1993) Suppl 4 SCC 589. The High Court was, therefore, clearly in error in not following the ratio of these judgments on untenable grounds. 26.. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of section 17 of the Haryana Act, levy of purchase tax on paddy would be valid notwithstanding the fact that the same is exempted under section 9(1)(b). Though in Murli Manohar's case[1991] 80 STC 79 (SC). (1991) 1 SCC 377, the raw material was not one of the declared goods; it makes no difference so far as the ratio of that decision is concerned. 28.. For the purpose of section 6 read with section 15 of the Haryana Act, a dealer is liable to pay tax on the taxable turnover of his sales and purchases. The expression "taxable turnover" is defined in clause (p) of section 2 to mean that part of a dealer's gross turnover which remains after allowing deductions under section 27 of the Haryana Act. Explanation (2) to the said clause provides that the proceeds of sale of any goods on the purchase of which tax is leviable under the Act or the purchase value of any goods on the sale of which tax is leviable under the Act shall not be included in the turnover. Inasmuch as the sale of paddy is taxable under the Act, the purchase value of such paddy cannot be included in the turnover; it is evident that no purchase tax can be imposed under section 6 of the Haryana Act. This explains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court. 31.. Mr. R.P. Gupta, learned counsel appearing for the assessee, placed reliance on the observations of this Court in Mukerian Paper Limited v. State of Punjab [1991] 81 STC 152 (SC). (1991) 2 SCC 580, and argued that section 4-B of the Punjab Act was similar to section 9 of the Haryana Act, so the ratio of the judgments of this Court in Murli Manohar's case [1991] 80 STC 79 (SC). (1991) 1 SCC 377 and Jagatjit Sugar Mill's case [1995] 96 STC 344 (SC) (1995) 1 SCC 67 would apply and as such the demand of purchase tax would be wholly illegal. Mr. V.C. Mahajan, learned Senior Counsel appearing for the State of Punjab, urged a feeble contention that neither the assessee was the exporter nor the rice procured from paddy was exported so the assessee would be liable to pay purchase tax on paddy. 32.. In view of the fact that the case proceeded on the basis that the assessee was exporter of rice as this fact is also evident from the judgment under appeal, it is difficult to accept the contention of the learned Senior Counsel. 33.. We shall now examine the contentions of Mr. Gupta. 34.. Section 4-B was inserted in the Punjab Act by the Punjab Act 3 of 1973 with effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India. 36.. A comparison of section 4-B of the Punjab Act with section 9(1)(b) of the Haryana Act shows that to a large extent there is similarity in both these provisions. To the same effect is the observation of a Bench of three learned Judges of this Court in Mukerian's case [1991] 81 STC 152 (SC). (1991) 2 SCC 580, which reads thus: "........even though the language of section 4-B of the Act is not identical with the relevant part of section 9(1) of the Haryana Act, it is in substance similar in certain respects, particularly in respect of the point of time when the liability to pay tax arises. Under that provision, as here, the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch of the goods outside the State." 37. In Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab [1994] 95 STC 170 (SC). (1994) Suppl 2 SCC 59, while sustaining the legislative competence of the State of Punjab to enact section 4-B and upholding its validity, this Court after anal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if his gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum; and (ii) on all purchases made by him after the commencement of the East Punjab General Sales Tax (Amendment) Act, 1958. Section 5 provides for levy of tax on taxable turnover. Section 6 exempts tax on sale of goods enumerated in Schedule B. As defined in section 5(2), "taxable turnover" would mean that part of a dealer's gross turnover which remains after deducting therefrom,- "(a) his turnover during the period on- (i) ............ (ii)........sale in the course of inter-State trade or commerce or sale in the course of export of goods out of the territory of India, or of goods specified in his certificate of registration for use by him in the manufacture in Punjab of any goods, other than goods declared tax-free under section 6, or sale in the course of inter-State trade or commerce, or sale in the course of export of goods out of the territory of India........". The value of purchase of goods (paddy) does not figure in the amounts which can be deducted for purposes of determining taxable turnover. The definition of "purchase" in clause (ff) is an incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate sale or purchase and takes place in the course of import of the goods into or export of the goods out of the territory of India. This clause is also of no consequence; firstly, because paddy and rice being two different commodities and secondly, the proviso was inserted only with effect from February 5, 1999 by Act 4 of 1999. 44.. In the light of the above discussion, it cannot but be held that the assessees are liable to pay tax on the purchase of paddy under section 4 of the Punjab Act and the similarity between section 4-B of the Punjab Act and section 6 of the Haryana Act and the ratio of the judgments in Murli Manohar's case (1991) 1 SCC 377 and other cases, referred to above, are of no assistance to them. 45.. We may now notice the contention of Mr. Chidambaram based on sub-section (3) of section 5 of the CST Act. The learned Senior Counsel argued that as paddy purchased by the assessees was exported albeit in the rice form, therefore, the purchase of paddy itself would be deemed to be in the course of export. He pointed out that the latin name for paddy and rice was the same, viz., Oryza- sativa L. and they fall in one and the same group. He suggested that the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree learned Judges in Babu Ram Jagdish Kumar's case (1979) 3 SCC 616 requires reconsideration. Those cases arose under the Punjab Act and Ganesh Trading Co.'s case (1974) 3 SCC 620 was decided even before the insertion of sub-section (3) of section 5. With great respect to the learned Judges, we are in entire agreement with the view expressed in those cases that paddy and rice are two different commodities. It is unnecessary to delve into the process of procuring rice from paddy to ascertain whether a complicated process results in change of identity of goods (raw material) as was found in State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory [1954] SCR 53 and in Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer (1996) 1 SCC 468 or involves only a simple process as was the case in Sterling Foods v. State of Karnataka (1986) 3 SCC 469 and Deputy Commissioner of Sales Tax v. Pio Food Packers (1980) Suppl. SCC 174 not affecting the identity of the goods (raw material). It is a common ground that the Parliament treated paddy and rice as two different goods as is evident from sub-clauses (i) and (ii) of clause (i) of section 14 of the CST Act which was inserted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-State trade or commerce or in the course of export out of the territory of India: Provided that in case the manufactured goods have been sold before the 1st day of January, 1988, the tax paid on goods, leviable to tax at the first stage of sale under section 18, used in their manufacture, shall not be refunded. " This provision speaks of adjustment and refund of tax in certain cases. It operates subject to the provisions of clause (iii) of proviso to sub-section (1) of section 15, we shall refer to it presently, and is also subject to the conditions and restrictions, as may be prescribed. Clause (i) of section 15-A stipulates that the tax leviable under the Haryana Act or the CST Act on the sale of goods by a dealer manufactured by him shall be reduced by the amount of tax paid in the State on the sale or purchase of the raw material, other than the tax paid on the last purchase of paddy, cotton and oil seeds used in their manufacture. Clause (ii) speaks of a situation where no tax is leviable on the sale of manufactured goods (except those specified in Schedule B), subject to the conditions and exceptions specified therein; or when the tax leviable on the sale of manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (a) outside the State or (b) in the course of import of goods into or export of the goods out of the territory of India, from a State law imposing or authorising imposition of a tax. We have also indicated that clause (c) of section 15 of the CST Act directs that where in respect of sale or purchase of paddy, tax has been levied in a State, then the tax leviable on the rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy. This is to ensure that paddy and rice, being declared goods, considered to be of special importance in the inter-State trade or commerce, be relieved of so much burden of tax on rice as has been on the paddy from which rice has been procured. It appears to us that clause (iii) of the proviso to sub-section (1) of section 15 reflects the intendment of clause (c) of section 15 of the CST Act. It is not possible to accept that section 15-A denies adjustment in regard to the tax paid on the purchase of paddy, as it is clear that in view of the opening words of section 15-A, inserted by the amendment referred to above, it is subject to clause (iii) of the proviso to sub-section (1) of section 15. Consequently, applying the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective operation of the said provisions. It was also observed that the legislative power included the subsidiary or the auxiliary power to validate law which was found to be invalid. Even if a law passed by the Legislature was struck down by the courts, it was competent for the appropriate Legislature to pass a validating law so as to make the provisions of the earlier law effective from the date when it was passed. In that connection, it was held that the test of the length of time covered by the retrospective operation could not by itself be treated as a decisive test. 55.. In Jawaharmal v. State of Rajasthan [1966] 1 SCR 890 a Constitution Bench of this Court laid down: "What it (section 2 of the Act of 1964) does is to amend retrospectively section 3 of the principal Act by inserting a proviso ........... The power to legislate includes the power to legislate prospectively as well as retrospectively, and in that behalf, tax legislation is no different from any other legislation. The power to tax can be competently exercised by the Legislature either prospectively or retrospectively; and that is precisely what section 2 has done in the present case. Therefore, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 59.. In the instant case, having regard to the provisions of section 40 of the Haryana Act, the authorities cannot revise the assessment for period beyond five years. Further, even though section 15-A was given retrospectivity with effect from May 27, 1971, it would hardly be effective between May 27, 1971 and April 1, 1991 when the benefit of exemption under section 9(1)(b) ceased to exist, as such none of contentions that giving section 15-A retrospectivity of 21 years could be harsh, arbitrary and illegal would be devoid of merit. 60.. No relief was available in regard to penultimate purchase of paddy which was converted into rice and exported. This position obtained till clause (ca) of section 15 of the CST Act was inserted by Act 33 of 1996 on September 28, 1996. The said clause (ca) provides, where a tax on sale or purchase of paddy is leviable under a State law and the rice procured out of such paddy is exported out of India, then for the purposes of sub-section (3) of section 5 of the CST Act, the paddy and rice have to be treated as a single commodity. What is, however, contended in clause (ca) is only declaratory and, therefore, retrospective. We do not so think. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.. To sum up: (1) In the specified circumstances in which charge of purchase tax on the raw material is imposed, clause (b) of sub-section (1) of section 9 of the Haryana Act and the exemptions provided therein would apply; the law declared by this Court in Murli Manohar Co.(1) (1991) 1 SCC 377; Hotel Balaji (1993) Suppl. 4 SCC 536 and K.B. Handicrafts3 (1993) Suppl. 4 SCC 589 holds the field; (2) while section 9 remained on the statute till April 1, 1991, retrospective amendments of sections 2(p), 6, 15 and 15-A of the Haryana Act would make no difference in regard to levy of purchase tax on paddy; (3) adjustment of purchase tax paid on paddy (raw material) is permissible under section 15-A of the Haryana Act during the relevant period; (4) by virtue of section 15-A of the Haryana Act, denial of refund of purchase tax, if any, paid by a dealer is not illegal much less unconstitutional; and (5) mere similarity between section 9(1)(b) of the Haryana Act and section 4-B of the Punjab Act would not relieve a dealer of the liability to pay purchase tax on paddy as the scope of charging sections under the said Acts are different. In view of the above discussion, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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