TMI Blog1966 (2) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... o be determined in the prescribed manner and the State Government was empowered to enhance the rate on the turnover in respect of any goods. "Turnover" was defined in section 2(i) to mean "the aggregate of the proceeds of sales by a dealer". By section 4, sale of water, milk, etc., and goods notified by the State Government was exempted from payment of tax. The Act was amended from time to time. Section 3-A was added empowering the State Government to declare by notification that the turnover in respect of any goods or class of goods will not be liable to tax except at such single point in the series of sales by successive dealers as it may specify and to fix the rate of tax. Section 3-AA was added laying down that the turnover in respect of oil-seeds and certain other goods will not be liable to tax except at the point of sale by a dealer to the consumer and the rate of tax was not to exceed 3 pies per rupee. Sections 3 and 3-AA were subsequently amended and the rate of tax was increased from 3 pies per rupee to 2 naye paise per rupee of the turnover. By another amendment definition of "turnover of purchases" was introduced; it was "the aggregate of the amounts of purchase price p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Gur 3 paise ..... per rupee on first purchases Oil-seeds ..... 2 paise per rupee on first purchases." By another Notification No. ST-7123 the State Government notified that with effect from 1st October, 1964, no dealer shall be liable to pay sales tax under this section if his turnover of foodgrains during the assessment year is less than Rs. 25,000. The State Government issued Notification No. ST-7931/X adding ghee to the list with effect from 1st December, 1964; the rate of tax was 5 paise per rupee. By another notification dated 16th February, 1965, the rate of tax on ghee was reduced to 3 paise per rupee. By a notification dated 26th December, 1964, the rate of tax on gur was increased to 5 paise per rupee. Rab was added to the list by a notification issued on 7th January, 1965, and the rate of tax was 5 paise per rupee on first purchases. The case of the petitioner is that prior to the amendment by Act No. 22 of 1964 it was liable to pay tax on the turnover of its sales of pulses at 1 paisa per rupee of the turnover and was made liable to pay tax on the turnover of purchases by section 3-D with effect from 1st October, 1964. It challenges section 3-D and the Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable on the turnover either of sales or purchases under section 3 or of purchases only under section 3-D; the former tax is payable by the seller or the purchaser, and the latter by the purchaser. The tax under section 3 is payable on all goods barring certain goods specified in section 4 and goods exempted by the State Government's notification; on certain goods it is payable only at a single point of sale but on other goods it is payable at every point of sale. The rate of tax is fixed by section 3 but the State Government is empowered to fix rates within limits in respect of goods selected for single point taxation. The Legislature has, on the other hand, neither specified the goods in respect of which the purchase tax (i.e., the tax payable under section 3-D) is payable nor the rate at which it is payable. The selection of goods subject to the purchase tax is left at the discretion of the State Government. So long as it does not issue a notification no, purchase tax is payable at all. When it issues a notification it is payable only in respect of the goods notified in it. The Legislature has not fixed the rate of the purchase tax but only fixed the maximum limits of 2 paise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held that section 6(2) of the Bombay Tenancy and Agricultural Lands Act (No. 67 of 1948), empowering the State Government to fix a lower maximum rate in any area as valid. The law on the subject of delegation of powers by a Legislature to the State Government was stated by Gajendragadkar, J., in these words: ''The Legislature cannot delegate its essential legislative function in any case. It must lay down the legislative policy and principle, and must afford guidance for carrying out the said policy before it delegates its subsidiary powers in that behalf." (page 7). The test laid down by him was "whether the Legislature has enunciated its policy and principle and given guidance to the delegate or not". He observed that in applying the test "this Court has taken into account the statements in the preamble to the Act, and if the said statements afford a satisfactory basis for holding that the legislative policy and principle has been enunciated with sufficient accuracy and clarity the preamble itself has been held to satisfy the requirements of the relevant tests." (page 7). In Hrishanker Bagla v. State of Madhya PradeshA.I.R. 1954 S. C. 465., sections 3 and 4 of the Essential Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent provisions of the Act or for different States was upheld in Basant Kumar v. Eagle Rolling MillsA.I.R. 1964 S.C. 1260. Gajendragadkar, C. J., relied upon Queen v. Burah(1878) 5 I.A. 178 at p. 195., and held that the Legislature had exercised its judgment as to place, person, laws, powers and that the impugned provision was conditional legislation and not delegation of legislation. The learned Chief Justice pointed out that the scheme envisaged by the Act could not be introduced in the whole of the country all at once, that it required careful experimentation by stages and in different phases and that consequently the question of extending its benefits had to be left to the discretion of the appropriate Government. The argument that the Legislature has delegated its essential legislative functions to the State Government amounts to arguing that the tax in question has been imposed by the State Government and not by the Legislature which alone has the power to impose it. This argument was repelled by the Judicial Committee of the Privy Council in Powell v. Apollo Candle Company(1885) 10 App. Cas. 282. Sir Robert P. Collier observed at page 291: "The duties levied under the Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority for the proposition that fixation of rates of taxes may be legitimately left by a statute to a non-legislative authority, for we see no distinction in principle between delegation of power to fix rates of taxes to be charged on different classes of goods and power to fix rates simpliciter, if power to fix rates in some cases can be delegated then equally the power to fix rates generally can be delegated ............ The question was on what subject-matter, and therefore on what persons, the tax could be imposed. Between the two we are unable to distinguish in principle, as to which is of the essence of legislation; if the power to decide who is to pay the tax is not an essential part of legislation, neither would the power to decide the rate of tax be so. Therefore, we think that apart from the express observation made, this case on principle supports the contention that fixing of the rate of a tax is not of the essence of legislative power." It approved of the decision in V.M. Syed Mohamed Co.'s case(1) There is no provision in section 3-D or any other section that the notification issued by the State Government must be laid before the Legislature within a certain time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which they were taxed) was challenged on the ground that no guidance was given to the Government in the matter of selecting a particular multiple for a particular area. Gajendragadkar, J., held that in view of the policy behind the Act and that the fact that the maximum limit to the multiple provided by the provision and the impracticability for the Legislature itself to provide different multiples for different districts and different classes of lands it could not be said that the discretion left to the Government was unfettered or uncanalised. In the same way the discretion left by section 3-D to the State Government to select the goods to be subjected to purchase tax and the rates at which they are to be taxed cannot be said to be unfettered or uncanalised. The distinction between conditional legislation and delegated legislation was pointed out by Kapur, J., in Hamdard Dawakhana v. Union of IndiaA.I.R. 1960 S.C. 554., at page 566 in these words: "In the former the delegate's power is that of determining when a legislative declared rule of conduct shall become effective: Hampton Co. v. United States(1927) 276 U.S. 394. , and the latter involves delegation of rulemaking power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the rates at which it is payable. The State Government is not given the power to impose purchase tax at all. When it issues a notification selecting the goods and the rates, and purchase tax is levied it is levied under the authority of section 3-D and not under the authority of the notification. Merely because the notification when specifying the goods and the rates states that purchase tax is payable at such and such rates on the turnover of such and such goods, it cannot be said that the tax is imposed by it. When it specifies the goods and the rates it may refer to the purchase tax payable on them under section 3-D, but the authority for the levy of the tax is section 3-D and not itself. It would be enough for the State Government to state in a notification that "such and such goods and such and such rates are notified in exercise of the power conferred upon the State Government by section 3-D"; on such a notification being issued purchase tax on the goods at the rate would become payable. On the goods and the rates being notified in a notification the position would be exactly the same as if section 3-D itself had provided that "there shall be levied and paid ........ a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc., would otherwise be subject to tax under section 3 that tax is not payable and if it would be subject to tax under section 3-D that tax is not payable. The argument that section 3-D confers power upon the Government to remove articles from the exemption list contained in section 4 is, therefore, misconceived. The State Government has not the power to select any of the goods mentioned in section 4 for imposition of purchase tax. Even if it selects them section 4 will prevail over section 3-D as it prevails over section 3. It is designed to exempt from taxation what would have been liable to taxation under sections 3 and 3-D. Then it was argued that if the State Government includes in a notification issued under section 3-D all the commodities, the turnover of which is taxed under sections 3 and 3-A, it would amount to the State Government's being invested with the power of repealing or rendering useless sections 3 and 3-A. There is no question of section 3 being repealed by a notification issued by the State Government under section 3-D regardless of the goods specified in it. Even if purchase tax is payable on the turnover of all goods section 3 is not thereby repealed; it rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate under section 3 on certain goods and all have to pay purchase tax on other goods under section 3-D and at the same rate. Consequently making the turnover of some goods liable to tax under section 3 and the turnover of other goods liable to tax under section 3-D is not at all making any discrimination between one dealer and another and no question of infringement of Article 14 arises. The reasons for which I have found that the power conferred upon the State Government to select the goods to be subjected to purchase tax under section 3-D and the rates to be applied to them is not a case of unconstitutional delegation of legislative power are available also for holding that no arbitrary power has been conferred upon the Government. The finding that the conferment of the power does not amount to unconstitutional delegation of legislative power is based upon the fact that the power conferred is guided or controlled and not absolute or arbitrary. Therefore, even in respect of the selection of goods and the rates applicable to them the power conferred upon the State Government is not arbitrary. It cannot be disputed that a taxing statute can be knocked down on the ground that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny classification made in connection with the levying of property taxes." (page 1735). Similarly, Sinha, C. J., said in Orient Weaving Mills (P.) Ltd. v. Union of India A.I.R. 1963 S.C. 98 at p. 103.: "It is always open to the State to tax certain classes of goods and not to tax others. The Legislature is the best judge to decide as to the incident of taxation as also to the amount of tax to be levied in respect of different classes of goods. The Act recognizes and only gives effect to the well established principle that there must be a great deal of flexibility in the incidence of taxation of a particular kind ......... It is a function of the State, in order to raise revenue for State purposes, to determine what kind of taxes shall be levied and in what manner." These observations confirm not only that the State Legislature itself could select some goods for being subjected to purchase tax and the rates at which the purchase tax is to be levied but also that the power to do so can be exercised by the State Government without Article 14 being infringed (provided it is conferred on it). In State of M. P. v. Bhopal Sugar Industries[1964] 52 I.T.R. 443; A.I.R. 1964 S.C. 1179., geogra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment wholly or partially to exempt any land from its provisions. No principle or policy was laid down for the guidance of the Government in exercise of the power. In the result, the challenge on the ground of infringement of Article 14 fails. In Petition No. 3579 it was contended that the petitioner was assessed without its being given any opportunity to be heard as required under rule 41(3). The assessment order that has been passed against the petitioner is a provisional assessment order under rule 41(3). Rule 41 applies to every dealer liable to pay tax under the Act; so it applies to every dealer liable to pay purchase tax under section 3-D. He is required to submit quarterly returns of his gross turnover and to deposit in the treasury the amount of tax collected by him on the turnover shown in each return and submit the treasury chalan with the return. Rule 41(3) lays down that if no return is submitted in respect of any quarter or if a return is submitted without the treasury chalan, the Sales Tax Officer must "after making such enquiry as he considers necessary, determine the turnover to the best of his judgment, provisionally assess the tax payable for the quarter... an ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
