TMI Blog1956 (10) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court observed: "The mere fact that the contract for sale was entered into within the Province of Madras does not make the transaction, which was completed admittedly within another Province, where the property in the goods passed, a sale within the Province of Madras according to the provisions of the Madras Sales Tax Act (as it stood before its amendment in 1947) and no tax could be levied upon such a transaction under the (then) provisions of the Act. A contract of sale becomes a sale under the Sale of Goods Act only when the property in the goods is transferred to the buyer under the terms of the contract itself." The learned counsel for the assessees places reliance on this authority to show that their Lordships have observed that the sale is not complete unless all the ingredients, i.e., bargain or contract of sale, the payment or promise of payment of price, the delivery of goods and the actual passing of the title, are present in the transaction. We agree with this contention, but as we have already held that in the contract of the assessees all these elements are present, we need not pursue the point any further. In the case of State of Bombay v. United Motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2), and, therefore, they would have been exempt from tax. The Ordinance, therefore, applies to such sales, and the tax liability arising thereon, and after the Ordinance, the exemption based upon Article 286(2) would no longer be applicable. The conditions of the Ordinance are therefore fully satisfied". Learned counsel for the petitioners before us realised that on the construction which we adopted, the sales effected by the petitioners in the present cases would have been taxable under section 22 of the Madras General Sales Tax Act and therefore the assessment and levy of taxes on these sales would be validated by section 2 of the impugned Act. The attack therefore was primarily on the constitutional validity of the impugned Act. We have however to point out that when Mettur Industries v. State of Madras[1956] 7 S.T.C. 691.was argued before us, no point was raised as regards the constitutional validity of the Validation Act but counsel confined his arguments to the proper interpretation of the enactment. The questions now raised before us are not therefore covered by our previous decision. The first contention of learned counsel for the petitioners was that the impugned Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislate with respect to inter-State trade and commerce and in line with this Article 286(2) provides that "a State law shall not impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide." It is not therefore correct to draw any distinction between the normal power of legislation by Parliament with respect to matters in the Union List and the power conferred by the opening words of Article 286(2). Both of them are legislative powers. The question that next arises is whether Parliament has transgressed the power conferred by Article 286(2) read in the light of Entry 42 of the Union List, and has legislated so as to impose a tax on the sale of goods, a legislative subject committed to the States under the State List. Our answer is that it has not. In considering this point one has to take into account the situation that arose as a result of the judgment of the Supreme Court in the Bengal Immunity case[1955] 6 S.T.C. 446. which was sought to be remedied by the impugned Act. Under the Government of India Act, 1935, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of Parliamentary legislation within the opening words of Article 286(2), the States were able to levy taxes practically on the same type of transactions as before. Then came the Bengal Immunity case[1955] 6 S.T.C. 464; 1955 S.C.J. 672. where the Supreme Court, again by a majority, overruled the decision in the State of Bombay v. United Motors(1), holding that the Explanation to Article 286(1)(a) could not be read into Article 286(2), so as to render what might be termed as "Explanation sale" as a sale in the course of inter-State trade. This decision meant that the taxes levied on what might be termed "Explanation sales" were treated as illegal and the States were faced with two problems: (1) having to refund taxes already levied and collected and (2) to desist from levying or collecting tax notwithstanding that on the date when the tax liability accrued the States would have been entitled to the taxes on the interpretation of Article 286 as it then stood, and the States had arranged their budgets on that basis. It was to remedy this dislocation, that the Centre stepped in with the impugned enactment. Section 2 which is its operative portion enacted: "Notwithstanding any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on the decision of the Privy Council in Punjab Province v. Daulat Singh[1946] F.C.R. 1. and particularly a passage dealing with section 298(2) of the Government of India Act, 1935, which ran, "nothing in this section shall affect the operation of any law which (a) prohibits, either absolutely or subject to exceptions, the sale or mortgage of agricultural land..........." Lord Thankerton who delivered the judgment of the Board said that the expression "prohibit" permitted only prospective legislation. The passage ran: "In the opinion of their Lordships, sub-section (2)(a) only excepts from the operation of sub-section (1) a prohibition of future action, for the reason expressed by Varadachariar, J., that the word 'prohibit' can only mean the forbidding of a transaction, and such a direction is appropriate only in respect of transactions to take place subsequently to the date of the direction, and cannot include an attempt to reopen or set aside transactions already completed, or to vacate titles already acquired. Their Lordships, therefore, agree with the High Court and the majority of the Federal Court that the benefit of sub-section (2)(a) cannot be claimed for the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 292 of the Government of India Act, 1935, designated a point of time and that before the legislative activity was manifested the pre-existing law would continue, which meant in effect, that Parliament could not legislate with retrospective effect. The learned Judges of the Allahabad High Court adopted the construction of the expression "until" in section 292 as barring a retrospective, repeal of a legislation which was in force after the Government of India Act, 1935. This view was rejected by the Federal Court. Dealing with the use of the expression "until" Sulaiman, J., said in the United Provinces v. Atiqa Begum(1) at page 148: "There is no doubt that the word 'until' does ordinarily connote a point of time. 'Until altered, repealed or amended' is equivalent to saying 'until the alteration, repealment or amendment'. This can have two possible meanings; first until the date from which the alteration, repealment or amendment takes place, and second, the date on which the Act altering or repealing or amending the previous law is actually passed, or rather when it comes into force. If the Act is retrospective, it would obviously operate from a date earlier than that on which it com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbargo on States levying taxes on inter-State sales. Assuming for the purpose of argument that Parliament can legislate retrospectively as regards the lifting of the ban, the only effect of such legislation would be to enable the State Legislatures to enact laws imposing taxes on sales in regard to permitted transactions so as to have effect from the date from which Parliament retrospectively lifted the ban. To take the instant case, Parliament has lifted the ban on State taxation of inter-State sales on and from 1st April, 1951. Therefore the State Legislature could impose a tax now so as to be effective from 1st April, 1951. This represents the entirety of the effect of Parliamentary legislation. If there were no valid State law imposing taxes on sales, by reason merely of the lifting of the ban a valid State law does not emerge. The General Sales Tax Act of the Madras State in so far as it enabled the State to levy taxes on inter-State sales ceased to be a valid law on the coming into force of the Constitution, since it was in contravention of the prohibition enacted by Article 286(2). No doubt the Presidential Sales Tax Continuance Order, 1950, gave to that law life for the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , deserve careful consideration. They involve in ultimate analysis the appreciation of the effect of a law being or being declared unconstitutional by the Courts. In regard to this matter two alternative positions are possible: (1) An unconstitutional law has a factual existence but is frozen and incapable of enforcement by reason of its contravening the Constitution. When however the constitutional ban ceases to operate and the fetters, whose existence rendered that law moribund, are removed, the law which theretofore was, so to speak, in a state of hibernation springs into activity because the superimposed shackles are removed. This is one possible view. (2) The other possible view is that a law which is repugnant to any provision of the Constitution is no law at all though found in print. When the Courts hold that a law is valid, it is active and enforceable, but when the Courts declare that it violates the provisions of the Constitution, the effect of such a declaration or holding is as it were to obliterate the law and efface it from the statute book. From this it follows that the lifting of the constitutional ban whose existence led to the law being unconstitutional does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental rights guaranteed by Part III had been obliterated from the statute book, the Supreme Court has specifically considered this question in Bhikaji Narain Dhakras v. The State of Madhya Pradesh[1955] 2 S.C.R. 589. The question before the Court was whether the C.P. and Berar Motor Vehicles Act, 1939, as amended in 1947, which admittedly contravened the fundamental rights guaranteed under Article 19 as originally enacted in the Constitution, could be enforced after 18th June, 1951, when it ceased to contravene Article 19 after the latter was amended. The contention raised before the Court was that, although on the authority of the decision in Shagir Ahmed's case(1) the enactment became void as and from 26th January, 1950, under Article 13 of the Constitution to the extent of its repugnance to the provisions of Article 19(1)(g), still the enactment could be enforced after 18th June, 1951, when by reason of the amendment of Article 19(6) of the Constitution effected by the First Constitutional (Amendment) Act, 1951, the Motor Vehicles Act ceased to be inconsistent with the fundamental rights guaranteed under the amended Article 19. On the other side, it was urged that the State Moto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not claim the fundamental right. In short, Article 13(1) had the effect of nullifying or rendering the existing law which had become inconsistent with Article 19(1)(g) read with clause (6) as it then stood ineffectual, nugatory and devoid of any legal force or binding effect only with respect to the exercise of the fundamental right on and after the date of the commencement of the Constitution. Therefore, between the 26th January, 1950, and the 18th June, 1951, the impugned Act could not stand in the way of the exercise of the fundamental right of a citizen under Article 19(1)(g). The true position is that the impugned law became, as it were, eclipsed, for the time being, by the fundamental right. The effect of the Constitution (First Amendment) Act, 1951, was to remove the shadow and to make the impugned Act free from all blemish or infirmity. If that were not so, then it is not intelligible what 'existing law' could have been sought to be saved from the operation of Article 19(1)(g) by the amended clause (6) in so far as it sanctioned the creation of State monopoly, for, ex hypothesi, all existing laws creating such monopoly had already become void at the date of the commenceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not omit to refer to two points of slight difference. Though almost the entirety of the Madras General Sales Tax Act was a pre-Constitution enactment, section 22, which was introduced by a Presidential Order under powers vested by Article 372(2) of the Constitution, was a post Constitutional law. But this, in our opinion, does not affect the principle, because section 22 merely reproduced almost word for word the material provisions of Article 286, which even without such amendment would have applied to control the taxation provisions contained in the said enactment. Though section 22 was designed merely to bring the Sales Tax Act into conformity with the Constitution, it did not really add anything to the content of the law as it stood on the coming into force of the Constitution. In our opinion, therefore the fact that section 22 was a post-Constitution law does not detract from the entirety of the Sales Tax Act being in substance a pre-Constitution enactment. The second point of difference requires some more consideration. The restriction on the legislative power in relation to the imposition of taxes on inter-State sales is not derived from the limitations imposed by Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sales that was on the statute book when the Constitution came into force, and it was a law enacted in this form that became subject to the provisions of Article 286(2) of the Constitution. Article 286(2) did not have the effect of affecting the legislative competence of the State to enact sales tax legislation. Power to levy taxes on the sale of goods is, even under the Constitution as it was under the Government of India Act, an exclusive power of the State, and so not within the competence of Parliament, and this is so notwithstanding that the Constitution includes among the legislative entries in the Union List, "inter-State commerce". The question that falls to be considered is the nature of the limitation imposed on the exercise of this taxing power of the State. In dealing with this, two matters deserve to be noticed. The first is the position when Parliament does not intervene by a law passed in terms of the provision in Article 286(2). In such a case, where we have an enactment like the Madras General Sales Tax Act which on its terms applies to all transactions-intra-State as well as inter-State-anyone against whom an assessment is sought to be levied might be able to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons even in America. In this connection we might refer to a passage in Mathews on American Constitutional System, pages 228 to 229, where this matter has been discussed, and also to a learned note in 60 Harvard Law Review 437. In our opinion, this rule is wholly inapplicable in the present context and we do not therefore consider it necessary to go more fully into this matter. This doctrine of Field, J., even if sound and not subject to qualifications can never apply to a law like the Madras General Sales Tax Act which was valid when enacted, notwithstanding that for some period the ban enacted by Article 286(2) prevented full force being given to its provisions. Article 286(2) of the Constitution did not create an actual "gap in the statute book" in the sense that the Sales Tax Act or some specified part thereof "dropped out of the authorised text", to adopt the words of MacDermott in Ulster Transport Authority v. James Brown Sons Ltd.(1953) North Ireland Reports 79. We therefore hold that this contention must also be rejected. Lastly, learned counsel for the petitioners urged that on a proper construction, section 2 of the impugned enactment only validated assessments already m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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