TMI Blog1996 (12) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... r referred to as 'the State Act') and the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act'). The levy of purchase tax on raw-materials purchased by the petitioner Was successfully challenged by it in this Court. By its judgment dated December 4, 1982 (Good-year India Limited v. State of Haryana, 153 STC 163) this Court declared the levy of purchase tax to be ultra vires to Section 9 of the State Act. This judgment relates to the assessment years 1976-77 and 1977-78. For the assessment years. 1973-74, 1974-75 and 1975-76 the challenge made by the petitioner was upheld in Bata India Limited v. State of Haryana and Anr., (1983) 54 STC 226. A Division Bench of this Court struck down the amendment made in the State Act by the Haryana General Sales Tax (Amendment Validation) Act, 1983. The State of Haryana filed petitions for Special Leave to Appeal against the judgments in Good Year India Limited v. State of Haryana, 53 STC 163 and Bata India Limited v. State of Haryana, 54 STC 226. During the pendency of the Special Leave Petitions, the respondents issued notices to the petitioners Under Section 50 of the State Act. These were also challenged by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er against the judgment of the Full Bench in Desh Raj Pushap Kumar Gulati v. State of Punjab, (supra) came to be considered by the Supreme Court alpngwith a batch of other appeals in Mis Good-year India Limited v. State of Haryana, AIR 1990 SC 781 which were filed by the other dealers of the State of Haryana. Their Lordships of the Supreme Court decided not only the appeals filed against the decision of the Full Bench but also similar appeals filed against the judgment of the Full Bench by other dealers, some writ petitions directly filed in the Supreme Cojurt challenging the validity of the Amendment Act No. 11 of 1984 and some appeals filed by the dealers against the decision of the Bombay High Court. A two Judges Bench of the Apex Court declared that taxes sought to be levied Under Section 9(l)(b)of the Haryana Act and Section 13-AA of the Bombay Sales Tax Act were taxes on consignment and, therefore, two provisions were beyond the legislative competence of the State. On that premise the judgment of the Full Bench of this Court and a judgment of the Bombay High Court in Wipro Products Limited v. State of Maharashtra, (1989) 72 STC 69, were reversed. The Supreme Court also upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tamil Nadu Sales Tax Act, Kerala Sales Tax Act and West Bengal Sales Tax Act in Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab and Anr., JT 1994(3) S.C. 239. It was argued on behalf of the dealers that Hotel Balaji's case (supra) was not correctly decided and in view of the apparent conflict of opinion between Mukerian Papers Ltd. v. State of Punjab (supra) on the one hand and Hotel Balaji and Ors. v. State of Andhra Pradesh and Ors. (supra) on the other hand, the question should be referred to a larger bench. This plea was rejected by a Bench of three Judges which consisted of M.N. Venkatachaliah, C.J., A.M. Ahmadi and B.P. Jeevan Reddy, JJ., two of whom (M.N. Venkatachaliah, as he then was and A.M. Ahmadi, JJ.) were members of the Bench which decided Mukerian Papers' case. The Apex Court observed that correctness of Goodyear India's case was not questioned in Mukerian Papers' case and, therefore, there was no occasion for the Bench to affirm or dissent from the decision in Goodyear India's case. The Court proceeded to reiterate the views expressed in Hotel Balaji's case and held that the approach adopted in Goodyear India does not accord with the scheme, intendment and lang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall advert in detail when we examine the arguments advanced on behalf of the parties, we are compelled to reach the conclusion that Cloth Trader's case (1979) 118 ITR 243 (SC) must be regarded as wrongly decided. The view taken in that case in regard to the construction of Section 80M must be held to be erroneous and it must be corrected. To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience. In this, we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter (AMY at page 18); "a Judge ought to be wise enough to know that he is fallible and, therefore, ever ready to learn: great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead: and courageous enough to acknowledge his errors." For the reasons aforementioned, 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." 8. The main judgment was written by B.P. Jeevan Reddy, J. with whom V. Ramaswami, J. agreed in the main judgment provisions relating to imposition of purchase tax in the Acts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumed in the manufacture of different commodities and (c) such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of an inter-State sale or export sale. It is evident that if such manufactured goods 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 manufactures' 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 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to say that the levy is upon consignment of manufactured goods in such a case? True it is that the levy materialises only when the purchased goods (raw materials) is consumed in the manufacture, of different goods and those goods are disposed of within the State otherwise than by way of sale or are consigned to 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 which 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." 9. B.P. Jeevan Reddy, J. then examined the issue whether the nature of purchase tax would "change merely because the levy is on the happening or non-happening of subsequent event and proceeded to observe:- "In several enactments, for instance, tax is levied at the last sale point or last purchase point, as the case may be. How does one determine the last purchase point in the State? Only when one k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 State or are despatched for such sale outside the State and so the last purchases are taxed not on the 'occasion' of the purchases and, consequently, it is beyond the competence of the Legislature. That certainly cannot be and the Supreme Court has held in the decision in State of Madras v. Narayanaswami Naidu (1968) 21 S.T.C. 1, that the goods are taxable in such cases in the financial year when they become the last purchases." The decision of Poti, J. was affirmed by a Division Bench of the Kerala High Court in Yusuf Shabeer v. State of Kerala (1973) 32 S.T.C. 359. Both these, decisions were expressly referred to and approved by a three-Judge Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the reasoning of Mukharji, J. in Goodyear India's case, B.P Jeevan Reddy, J. observcd:- "For the above reasons, we find it difficult to agree with the reasoning of Mukharji, J., in Goodyear (1990) 76 S.T.C. 71 (SC), (1990) 2 S.C.C. 71. It is also not possible to agree with the learned Judge when he says that "the two conditions specified, before the event of despatch outside the State as mentioned in section 9(1)(b), namely, (i) purchase of goods in the State and using them for the manufacture of any other goods in the State are only descriptive of the goods liable to tax under section 9(l)(b) in the event of despatch outside the State". When the tax is levied on the purchase of raw material, on the purchase price and not on the manufacture of goods or on the consignment value (such a concept is unknown to Haryana Act) or sale price of the manufactured goods - the above construction, in our respectful opinion, runs against the very grain of the provision and has the effect of nullifying the very provision. By placing the said interpretation, section 9 has been rendered nugatory; except for the two minor areas pointed out in Murli Manohar Co. v. State of Haryana, (1991) 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions urged by Shri Aggarwal relates to the constitutional validity of purchase tax. Learned counsel argued that the levy of purchase tax interferes with the free trade and commerce and it is, therefore, ultra vires to the provisions of Article 301 of the Constitution. Shri Aggarwal submitted that the State of Haryana did not seek the sanction of the President as required by Article 304 (b) of the Constitution and, therefore, the levy of purchase tax is not saved by that Article. He relied on the decisions of the Supreme Court in Buxa Dooars Tea Company Limited v. State of West Bengal and Ors., (1989) 3 S.C.C. 211, Indian Cement and Ors. v. State of Andhra Pradesh and Ors., (1988) 1 S.C.C. 743, Weston Electronics and Anr v. State of Gujarat and Ors., (1988) 2S.C.C. 568, West Bengal Hosiery Association and Ors. v. State of Bihar and Anr., (1988) 71 S.T.C. 298 and Andhra Steel Corporation v. Commissioner of Commercial Taxes in Kamataka, A.I.R. 1990 S.C. 1912. The learned Advocate General, Haryana argued that this ground of challenge is no longer open to the petitioners because the same has been negatived in the decision rendered Goodyear India Limited v. State of Haryana and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as contemplated by Article 301. But restrictions, freedom from which is guaranteed by Article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 301. In determining the limits of the width and amplitude of the freedom guaranteed by Article 301 a rational and workable test to apply would be: Does the impugned restriction operate directly or immediately on trade or its movement?" 15. The Apex Court went on to examine the constitutional authority of the Assam Taxation (on Goods carried by Roads or Inland Waterways) Act (13 of 1954) and held that the tax on goods solely on the ground that they are carried by road or by inland waterways within the area of the State impedes the freedom of trade and, therefore, it was ultra vires to Article 301 of the Constitution. 16. The question again fell for consideration Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan and Ors., A.I.R. 1962 S.C. 1406. By a majority judgment, the Supreme Court held that the regulatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrence with the majority judgment. In the majority judgment scheme of the relevant provisions of the Central Sale Tax Act was discussed and reference was made to the decisions of the Supreme Court in Atiabari Tea Company Ltd. v. State of Assam (supra), Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (supra), Andhra Sugar Limited v. State of Andhra Pradesh (supra) and it was then held :- "An Act which is merely enacted for the purpose of imposing tax which is to be collected and to be retained by the State does not amount to law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, merely because of varying rates of tax prevailing in different States." The Court further held: "The Central Sales-Tax though levied for and collected in the name of the Central Government is a part of the sales-tax levy imposed for the benefit of the States. By leaving it to the States to levy sales-tax in respect of a commodity on intra-State transactions no discrimination is practised: and by authorising the State from which the movement of goods commences to levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods outside the State, he has to pay a higher rate of tax and thus he is discriminated as compared to the other dealer/manufacturer who purchases the raw material on payment of 4 per cent purchase tax, but despatches the raw material straightaway outside the state and uses them in the manufacture of goods outside the State. The High Court held that there was no violation of Article 301 of the Constitution. Reference was made to the decision of this Court in Atiabari Tea Co. Ltd. v. State of Assam, A.I.R. 1961 S.C. 232, Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, A.I.R. 1962 S.C. 1406, Andhra Sugars Ltd. v. State of Andhra Pradesh, A.I.R. 1968 S.C. 599, State of Madras v. N.K. Nataraja Mudaliar, A.I.R. 1969 S.C. 147 and State of Kerala v. A.B. Abdul Kadir, A.I.R. 1970 S.C. 1912. One has to determine : does the impugned provision amount to restriction directly and immediately on the trade or commerce movement? As was observed by this Court in Kalyani Stores v. State of Orissa, A.I.R. 1966 S.C. 1686, imposition of a duty or tax in every case would not tantamount per se to any infringement of Article 301 of the Constitution. Only such restrictions or impediments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t i cannot be held that Section 9 is violative of Article 301 of the Constitution. In our ' opinion, the principles enunciated by the Supreme Court in Andhra Sugar Limited's case (supra), State of Madras v. N.K Nataraja Mudaliar (supra) and the observations made by S. Mukharji, J. in Goodyear India Limited v. State of Haryana (which have been extracted above)fully apply to these cases. Therefore, levy of purchase tax cannot be dubbed as unconstitutional. 22. Now we shall refer to the decisions relied upon by Shri R.R. Aggarwal. Indian Cement and Ors. v. State of Andhra Pradesh and Ors., (1988) 1 S.C.C. 743 is a case in which preference given to the local manufacturers in the rate of sales tax was held to be contrary to the scheme of Part XIII of the Constitution on the ground that such preference affects the free trade and commerce. The Court held that the course of flow of trade is adversely affected by unfavourable treatment in the matter of taxation to those who were not local manufacturers. 23. In Weston Electronics and Anr. v. State of Gujarat and Ors., (1988) 2 S.C.C. 568, levy or lower rate of tax Under Section 49 of Gujarat Sales Tax Act on the goods manufactured locall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. The aforementioned judgments relate to the cases in which different rates of tax were imposed on locally manufactured goods or locally purchased raw-material used in the manufacture of goods on the one hand and the imported goods/raw-material on the other hand or where the tax was on the despatch of consignment. Therefore, none of them has got any bearing on the point raised in these petitions. The argument of Shri Aggarwal that the observations made by the Supreme Court in Goodyear India Limited v. State of Haryana (supra) should be read as confined to the interpretation of Section 13-AA of the Bombay Sales Tax Act, 1957 is also unacceptable. The Supreme Court was dealing with the provisions contained in the Haryana Act as well as the Bombay Act regarding levy of purchase tax and, therefore, the conclusion recorded in the context of challenge to the imposition of purchase tax on the ground of violation of Article 301 squarely applies to the interpretation of the Haryana Act as well as the Bombay Act. We, therefore, do not find any merit in the challenge to the provisions of Section 9 on the ground of violation of Article 301 of the Constitution. 27. The other argument advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 which is subject matter of challenge in Civil Writ Petition No. 6646 of 1986 relates to the assessment year 1973-74. Perusal of this order shows that in the first place the Assess ing Authority has taken notice of the decision of the High Court; passed in Goodyear India Limited v. State of Haryana, 53 S.T.C. 163. It then referred to the provisions of section 9(1), along with the amendments made in it and the decision of the Full Bench in Desh Raj Pushap Kumar Gulati v. State of Punjab (supra) and observed that while allowing the writ petition in 53 S.T.C. 163, the High Court did not debar the State to levy purchase tax and rejected the argument raised on behalf of the petitioner that the levy was contrary to Section 9 or Section 15 of the Act. From this order, it is clear that the petitioner did not raise the plea of limitation before the Assessing Authority. However, in the writ petition one of the grounds raised by the petitioners for challenging the impugned order is that the same is barred by limitation specified in Section 31. Since the question of limitation has been raised in the writ petitions, we do not deem it proper to refuse adjudication of the point raised by the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the year for which the turnover is proposed to be re-assessed. After its amendment vide Act No. 1 of 1988, this power can be exercised by the Assessing Authority at any time within three years from the date of the final assessment order. However, for exercising the power Under Section 31, the following conditions must be satisfied :- (a) The Assessing Authority, on the basis of definite information which has come into its possession, discovers that the turnover of the business of a dealer has been under assessed or has escaped assessment in any year ; (b) Reasonable opportunity of being heard is given to the dealer in the prescribed manner. 32. Section 32 declares that notwithstanding the provision relating to the period of limitation contained in Sections 28,29 or 31 or any other provision of the Act, assessment or re-assessment may be made at any time in consequence of, or to give effect to any order made by the Court or other authority under this Act. Sub-section (2) of Section 32 further declares that the period during which assessment proceedings remained stayed under the orders of the Court or other authority shall be excluded in computing the period of limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the Assessing Authority has taken proceedings in accordance with the State Act and has passed orders for levy of purchase tax which were nullified at one stage by this Court. When the High Court quashed the assessment made by the competent authority, the order of assessment became non-existent and the Assessing Authority was within its jurisdiction to take "proceedings for passing fresh order of assessment keeping in view the amendment made in the State Act as well as the decision of the Full Bench in Desk Raj Pushap Kumar Gulati. 34. The decision of the Supreme Court in S.S. Gadgil's case (supra) relied upon by Shri Aggarwal relates to the interpretation of Section 34(1)(b) and proviso (iii) thereto and Section 18 of Finance Act, 1956. Their Lordships held the period prescribed by Section 34 for Assessment is not a period of limitation but it imposes a fetter upon the power of the Income Tax Officer to bring to tax escaped income. 35. In Income Tax Officer v. Induprasad (supra), the Apex Court interpreted the provision of Section 34 of the Income Tax Act, 1922 and Sections 297(2)(d)(ii) and 148 of the Income Tax Act, 1961. Their Lordships held that the assessment which has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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