TMI Blog1957 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... d cheroots. In all these petitions, the retrospective levy of sales tax on the manufacture of cigars and the levy of tax on the first sale of country tobacco is challenged. In order to understand the several contentions, it is necessary to give the legislative history of the levy of sales tax on these articles. Section 4 of the General Sales Tax Act which was enacted originally in 1939 is as follows: " The provisions of this Act shall not apply to the sale of electrical energy, motor spirit as defined in the Madras Sales of Motor Spirit Taxation Act, 1939, manufactured tobacco as defined in the Madras Tobacco (Taxation of Sales and Licensing) Act, 1939, and any goods on which duty is or may be levied under the Madras Abkari Act, 1886, the Madras Prohibition Act, 1937, or the Opium Act, 1878." Manufactured tobacco was defined in Madras Tobacco Act VIII of 1939 by section 2-A, clause (b), as amended by Act IV of 1940, as meaning cigars, cheroots, cigarette-tobacco, pipe-tobacco, or tobacco intended for a further process of manufacture. Therefore under section 4 cigars, cheroots, cigarettes, beedies and snuff etc., were exempt from sales tax. By section 3 of the Madras Tobacco Taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act inapplicable to articles such as cigars, cheroots, cigarettes, cigarette-tobacco and pipe-tobacco, beedies and snuff, the sale of cigars and cheroots at less than 0-2-0 each, beedies, snuff, chewing tobacco or any other product manufactured from tobacco was made liable to sales tax under section 3(1) only at the point of the first sale effected by a dealer in Andhra whose turnover is more than Rs. 10,000 and similarly raw tobacco except the country variety thereof, whether cured or uncured, became subject to sales tax if the turnover was over Rs. 10,000 as both were not exempt by section 3(3) under which a dealer whose turnover in any year is less than Rs. 10,000 is not liable to pay any tax for that year under sub-section (1) or subsection (2) of section 3. This result was achieved by Act XIV of 1955 adding clauses (vii) and (viii) to section 5 of the General Sales Tax Act, which would read thus: " Subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees: (i) to (vi) (vii) the sale of cigars and cheroots at less than two annas per cigar or cheroots, and bidies, snuff, chewing tobacco or any other product manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax to which he is liable under sub-section (1) on his total turnover for the year: Provided that, in the case of goods imported into the State either from outside the territory of India or from any other State in India, the tax shall be levied on the first sale effected in the State by a seller who is not exempt from taxation under sub-section (3), after the import of the said goods into the State: Provided further that, in the case of an assessment made under this sub-section, the burden of proving that the sale was not the first sale made in the State by a person not exempt from taxation under sub-section (3), or was not the first sale effected by such person after the import of the said goods into the State, as the case may be, shall lie on the person assessed: Description of goods. Rate of tax for every rupee in the turnover relating to such goods. (1) (2) (i) to (xv) (2-A) The sale of any of the goods mentioned below shall be liable to tax at the rate specified and applicable thereto, only at the point of the first sale effected in the State by a seller, and the tax shall be paid by the seller on his turnover in each year relating to such goods: Description of goods. Rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the territory of India or from any other State in India, the tax shall be levied on the first purchase effected in the State after the import of such goods; and (b) the burden of proving that any purchase effected by a person is not liable to tax under this sub-section shall lie on the person assessed. Item (iv) in this sub-section shall be deemed to have come into force on the date on which the Madras General Sales Tax and the Madras Tobacco (Taxation of Sales and Registration) (Andhra Amendment) Act, 1955 (Andhra Act XIV of 1955), came into force. (2-C) If, in the opinion of the State Government, the levy of a single point tax on any of the goods specified in sub-section (2-A) or sub-section (2-B) is resulting in evasion of tax or considerable loss of revenue to the State, the State Government may, by notification in the Andhra Gazette, suspend the levy of such single point tax on such goods, and thereupon the provisions of sub-section (1) of this section shall apply in relation to such goods and sub-section (2-A) and sub-section (2-B) shall not apply in relation thereto: Provided that no such notification shall come into force until it is approved by a resolution of the Legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in their preparation, which will amount to levy of tax on the same commodity at two points contrary to the express policy of the amending Act and is therefore illegal; and (f) that sub-section (2-B) of section 3 does not specify the person from whom tax is liable to be collected and in the absence of such specification, the Government cannot collect tax under the said sub-section from any person. The first contention urged is that no legislation can be enacted levying a tax retrospectively, but this contention put thus has no force. The Constitution of India has by Article 245 enacted, that subject to its provisions, the Union Parliament may make laws for the whole or any part of the territory of India and that the Legislature of a State may make laws for the whole or any part of the State, while Article 246 proceeds to distribute the legislative powers as between the Parliament and the State Legislatures in the country. These articles read with Item 54 in List II of the Schedule VII in respect of tax on sale or purchase of goods, vest a power in the State Legislature to enact laws without imposing any limitation or restriction in regard to their being enacted retroactively. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 proceeds to distribute legislative powers as between the Parliament and the State Legislatures in the country. Thus, those articles read with Entry No. 82 of List I of the Seventh Schedule empower Parliament to make laws with respect to taxes on income for the whole of the territory of India, and no limitation or restriction is imposed in regard to retroactive legislation. It is, therefore, competent for Parliament to make a law imposing a tax on the income of any year prior to the commencement of the Constitution." This is a clear and concise statement of law which admits of no doubt that the legislatures within the spheres allocated to them are supreme, subject to the constitutional limitations. While the courts are averse to construing a statute, particularly a taxing statute, so as to give a retrospective effect unless express words or necessary intendment compel them to do so, none the less this rule of construction cannot be confused with a constitutional limitation imposing a fetter on the power of legislature to enact retrospective law. The further assumption underlying the argument that the dealer is merely the agent for collection from the consumer and the tax cannot, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing passed on to the consumer by an advance in prices corresponding more or less to the amount of the tax." These observations do not, however, help the argument that the tax is leviable on the consumer to be collected by the dealer as an agent of the Government. On the other hand, the observations of Jayakar, J., clearly show that the tax is passed on to the consumer by an advance in prices corresponding more or less to the amount of the tax. It will be seen from the provisions of the above sections and rules that an unregistered dealer is not authorised to collect any amounts by way of tax while the registered dealer is subject to the conditions and restrictions imposed. There is nothing in these sections which justifies the contention that the dealers are merely in the position of agents collecting tax from the consumers and passing it on to the State Government without any liability on their part to pay tax. This contention is negatived by the taxing section itself, which says that every dealer shall pay for each year a tax on his total turnover. It is immaterial whether the dealer collects any tax or not, but the liability to pay is there. If a registered dealer collects the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may at once state that there are no materials placed before us from which we can conclude that the effect of the imposition of the sales tax retrospectively or the imposition of it on dealers selling cigars, cheroots at less than 0-2-0 each, snuff, beedies etc., with turnovers below Rs. 10,000 has the effect of forcing them to discontinue the business. That apart, the policy of taxation is more appropriately the province of the statement and of the legislature rather than of the lawyer or the courts. It is a public policy dependent not only upon the necessities of administration but also implementation of the schemes to serve the public needs. If in the exercise of the general policy of taxation each of the units of the federation is empowered to tax on the several items assigned to it respectively, the heaviness of the burden upon an individual, unless it exceeds the constitutional limits, cannot be questioned. Article 265 of the Constitution provides that no tax shall be levied or collected except by the authority of law. The State, therefore, has the power under this article to levy and collect taxes which power cannot be restrained, that is, the fundamental rights are not imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to classify so arbitrarily as to subvert the fundamental doctrine of equal protection of laws, nourished and developed with so much care by the constitutional law of America and incorporated in our Constitution. We have no right to conjure up possible situations which might justify discrimination or, in the words of another learned Judge, the discriminations are not to be supported by mere fanciful conjecture. Subject to this caution, sufficient latitude is shown to states in the matter of classification. It is also well settled that there is a strong presumption in favour of the validity of legislative classification and it is for the person who seeks to question it, to allege and prove that the classification is obnoxious to the constitutional prohibition. The decided cases have gone to the length of holding that, if any state of facts can reasonably be conceived to sustain a classification, the existence of that state of facts must be assumed. Briefly stated, whether it is a taxation law or any other law, it must satisfy the test of the equality clause. But, in the case of tax laws, presumably in view of their importance for the goods administration of the country, a larger d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date on which that Act came into force. That apart the other varieties of manufactured tobacco are taxed under the provisions of Act IV of 1953 without any turnover limit whatsoever and there has been no distinction or discrimination between these goods and goods sold at lesser rates. In the reply to the supplemental counter-affidavit filed in W.P. No. 317 of 1957, it is stated that at least 25% of the members are dealers having a turnover exceeding Rs. 10,000 and that as a result of the investigations made by their association, it was stated that the tax paid by the dealers having turnovers exceeding Rs. 10,000 will represent nearly 75 per cent. of the total tax realisable, if all the dealers are to be taxed irrespective of the turnover, that nearly 25 out of the 99 members will have turnovers exceeding Rs. 10,000 and more than 15 of them will have turnovers exceeding one lakh, so that the tax payable by the petty dealers will be about one-fourth of the total tax payable by all the members of the association. The reply to the counter does not give a concrete picture of the sales tax on cigars, cheroots, chewing tobacco, snuff and beedies, in the entire State as a whole and what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This contention therefore has no force. Again it is submitted by Shri Anantha Babu that the effect of the imposition of tax under sub-sections (2-A) and (2-B) is not only to levy tax on country tobacco at the purchase point, but also to levy on cigars and cheroots produced from the very same tobacco, even though there is no manufacturing process involved, which amounts to levy of tax on the same commodity at two points, contrary to the policy of the amending Act which prescribes levy at single point. In other words, his contention would amount to stating that cigars and cheroots, which are prepared from country tobacco sold at less than 0-2-0 each, involve no manufacturing process and must be considered to be a tax on country tobacco itself. In the supplemental counter-affidavit it is alleged that cigars and cheroots are prepared by merely sprinkling the tobacco with water, removing the stems, cutting the leaves into convenient strips and twisting the longer leaves round the shorter pieces which are used as stuffing material; that except the raw tobacco leaf no other commodity is used; and that the conversion of a tobacco leaf into a cigar is not a work of art and involves no part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able thereto, only at the point of the first sale effected in the State by a seller. It is contended that under sub-section (2-B) the point of purchase would involve the seller as well as the purchaser and while for items(i) and (ii), mica and manganese, it is the last dealer who buys it in the State that is taxable, nothing has been specified with respect to the country variety of tobacco, whether cured or uncured, except to state that at the point of first purchase in the State. Learned advocate, therefore, argues that the dealers, viz., whether the purchaser or seller, has not been specified for the purposes of levy of tax on country variety of raw tobacco at the purchase point and consequently no tax is exigible from the purchaser without such specification. Learned AdvocateGeneral, on the other hand, contends that sub-sections (2-A) and (2-B) are added to section 3 which deal with the person liable to pay tax and must be read together and so read, the purchaser at the purchase point and the seller at the sale point must be construed as the dealer from whom tax is exigible. Several authorities have been cited in support of the proposition that taxing statutes should be strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epelled by Rowlatt, J., who made the following terse observations: "......It is urged by Sir William Finlay that in a taxing Act clear words are necessary in order to tax the subject. Too wide and fanciful a construction is often sought to be given to that maxim which does not mean that words are to be unduly restricted against the Crown, or that there is to be any discrimination against the Crown in those Acts. It simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." In Partington v. Attorney-General[1869] L.R. 4 H.L. 100 at 122., Lord Cairns made the following observations upon which the learned advocate for the petitioners placed great reliance. "......I am not at all sure that, in a case of this kind-a fiscal case -form is not amply sufficient; because, as I understand the principle of all fiscal legislation, it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in search of an intention which the words themselves did not suggest. To determine that a case is within the intention of a statute, its language must authorise us to say so." In Guy T. Helvering v. Stockholm Enskilda Bank79 L. Ed. 211. Sutherland, J., remarked at page 218: "......... The intention of the law maker controls in the construction of taxing Acts as it does in the construction of other statutes, and that intention is to be ascertained, not by taking the word or clause in question from its setting and viewing it apart, but by considering it in connection with the context, the general purposes of the statute in which it is found, the occasion and circumstances of its use, and other appropriate tests for the ascertainment of the legislative will.........." "The rule of strict construction is not violated by permitting the words of a statute to have their full meaning, or the more extended of two meanings. The words are not to be bent one way or the other, but to be taken in the sense which will best manifest the legislative intent." In Best Co., Ltd. v. The Corporation of Madras47 Mad. 262 (F.B.). a Full Bench of the Madras High Court in considering section 110 and rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislature and which may serve to show that the particular provision ought not to be construed as if it is construed alone and apart from the rest of the Act must of necessity be also construed. Sub-sections (2-A) and (2-B) are added to section 3 of the Madras General Sales Tax Act by the Andhra Amendment Act XVI of 1956 and must be read together. Section 3(1)(a) makes every dealer liable to pay for each year a tax on his turnover for that year. A dealer has been defined by section 2(b) as meaning any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for other valuable consideration and includes persons mentioned in clauses (i), (ii) and (iii) thereof. Similarly the dealer is referred to in defining turnover in section 2(i). Though a dealer is a person who is either a buyer or a seller, the taxing provision under section 3(1) becomes operative when the buyer or the seller on whose turnover the tax is to be levied either by the rules or by the provision of the statute itself. Sub-section (2) itself specified that it is the seller that should pay tax at the rates specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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