TMI Blog1991 (7) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.. At the request, and with the consent, of the learned Advocates appearing for the parties, all the three petitions have been heard together and are being disposed of by this common judgment and order. 3.. With a view to overcome the difficulties encountered by different State Legislatures in imposing and levying sales tax on certain transactions the Parliament amended the Constitution by Constitution (Forty-sixth Amendment) Act, 1982. In particular the Parliament introduced clause (29A) in article 366. By introduction of this clause, the Parliament enlarged the definition of "sale". The transactions which were not strictly speaking "sale" were sought to be brought within the scope of the expression "sale or purchase of goods". Clause (29A) introduced in article 366 by the Constitution (Forty-sixth Amendment) Act, 1982, reads as follows: "(29A) 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xth Amendment) Act, 1982. 5.. The grievance of the petitioner is that by inserting separate definition clause in section 2(30-C) of "specified sale" and making separate and distinct provision as regards the turnover of specified sale and for the liability to pay tax on turnover of such specified sales, right to use any goods has been treated separately without any rational basis whatsoever. On account of this separate treatment, transactions which formed part of the definition clause of "specified sale" [section 2(30-C)] have been excluded from the benefits of deductions or set-off which are otherwise available in respect of all other transactions of sale. Even in the transactions of sale which have been deemed to be sale on account of the amendment in the Constitution and insertion of clause (29A) in article 366, all other deemed sales are entitled to deductions while transactions of transfer of the right to use any goods have been treated separately. For such separate treatment and for depriving the benefits of deduction or set-off, there is no rational basis. Therefore, the provisions made by the State Legislature in definition clause as well as regarding the liability to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the export of the goods out of such territory. It is also provided in the said section that the provisions of the Act and the Rules are required to be read and construed accordingly. Explanation to the said section provides that as to whether a sale or purchase takes place in the course of inter-State trade or commerce, or outside the State or in the course of the import of the goods into the territory of India or export of the goods out of such territory, shall be determined in accordance with the principles specified in sections 3, 4 and 5 of the Central Sales Tax Act, 1956. In view of this express provision, we asked the learned counsel for the petitioners to point out any provision in the Sales Tax Amendment Act (14 of 1985) by which the State Legislature seeks to levy tax on transfer of right to use goods which takes place outside the State of Gujarat or in the course of inter-State trade or commerce. No such provision has been pointed out to us. In view of this position, there is no substance in this contention. Hence the contention fails. 8.. It was contended that liability of tax on the transfer of right to use any goods has been created by inserting section 3A in the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (36-A) of section 2 of the Act read with the definition of "sale price" in section 2(29) do not make any distinction between the price of the goods and other components such as interest and service charges. It is submitted that therefore the definition is required to be read down or it is required to be struck down. Sale price as defined under section 2(29) means the amount of valuable consideration paid or payable to a dealer for any sale made, including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof. The cost of insurance for transit or the cost of installation when such cost is separately charged is excluded from such consideration. However, the valuable consideration paid or payable in respect of sale transactions which have been taken within the enlarged meaning of the term "sale" is also included in the "sale price". Turnover of specified sales as defined in section 2(36-A) means the aggregate of the amounts of sale price received by a dealer referred to in sub-clause (h) of clause (10) in respect of any specified sale made during a given period. Clause (h) of definition of term "dealer" [section 2(10)] in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration and may be content with lesser rate of interest or lesser margin of profits. They may not charge any amount whatsoever for services. There may be consideration which may weigh with different dealers differently. The Legislature cannot be expected, nor it is supposed, to embark upon to do something which is impossible and then land itself into enacting law which cannot be implemented at all. In view of this position, the contention has got to be rejected as having no merits. 13.. The learned counsel for the petitioners submitted that levy of sales tax on transactions of lease executed prior to August 6, 1985 (designated date) although the lease period might not have expired on the designated date and the lease may be in operation even after August 6, 1985, is illegal. The contention raised is on the ground that the tax on such transactions will be retrospective. However, at the time of argument, the learned counsel for the petitioners stated that in view of the averment made in para 10 of the affidavit in reply that the tax is not retrospective, this ground is not pressed. 14.. In our opinion also there is no substance in the contention that the tax would be retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erting clause (29A) in article 366, six different types of transactions which are not otherwise sale, have been deemed to be "sale" within the extended meaning given by clause (29A) of article 366 of the Constitution. When the State Legislature amended the Gujarat Sales Tax Act by Act 14 of 1985 and introduced certain amendments in the Act, the State Legislature amended the definition of "sale", the definition of "dealer" and that of "goods" (sic). By this very amendment the definition of "specified sale" and "turnover of specified sales " have been introduced and provision is made for levying tax in respect of turnover of specified sales. 17.. It is evident that by making the aforesaid provisions, the Legislature has given special or different treatment to transactions relating to right to use any goods for any purpose whether or not for a specified period, for cash, deferred payment or other valuable consideration. This type of sale is covered by sub-clause (d) of clause (29A) of article 366 of the Constitution while in the amended Act such transactions are not included in the definition of "sale" occurring in clause 2(28). But the same has been introduced separately in clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person or thing or to several individual persons or things but no reasonable basis of classification may appear on the face of it or be deducible from the surrounding circumstances. In classes (iii), (iv) and (v), the statutes which have been mentioned therein are not relevant for the purpose of deciding the questions involved in these petitions. The learned counsel for the petitioners submits that in the instant case, the legislation falls in class (ii). It is submitted that there is no rational basis for the classification and that there is no nexus with the objects sought to be achieved by such classification. 20.. It is further submitted that even with regard to the taxing statutes the aforesaid principles would be applicable. In support of this contention, the learned counsel for the petitioners has relied upon the following decisions of the Supreme Court: 1.. Kunnathat Thathunni Moopil Nair v. State of Kerala reported in AIR 1961 SC 552. 2.. Khandige Sham Bhat v. Agricultural Income-tax Officer reported in [1963] 48 ITR 21 (SC); AIR 1963 SC 591. 3.. State of Andhra Pradesh v. Nalla Raja Reddy reported in AIR 1967 SC 1458. Relying upon the aforesaid decisions, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter and unless the classification made can be termed to be palpably arbitrary, it must be left to the legislative wisdom to choose the yardstick for classification, in the background of the fiscal policy of the State to promote economic equality as well." 22.. In the case of Federation of Hotel Restaurant [1989] 74 STC 102 (SC); AIR 1990 SC 1637, in para 20 (para 21 in STC) of the judgment it is, inter alia, observed that having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are accordingly less rigorous. In examining the allegations of hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. The Legislature can exercise an extremely wide discretion in classifying items for tax purposes so long as it refrains from clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by sub-clause (d) on the other hand. The distinguishing feature that the ownership right remains with the vendor is not present in all other types of transactions. Thus it is evident that there is intelligible difference between the specified sale [section 2(30-C)] and the sale covered by definition in section 2(28). 24.. Once there is rational basis or intelligible criteria for making distinction between different types of sale, the question arises, is there any nexus with the object sought to be achieved. The learned counsel for the petitioners submitted that for introducing the Amendment Act (Act 14 of 1985) no object is discernible. In the Statement of Objects and Reasons, merely the summary of the amended provisions is reproduced. Of course there is reference to the budget speech of the Chief Minister. It is submitted that even in the budget speech there is nothing to indicate as to what is the object of the amendment. However, in the budget speech there was mention about the proposed amendment and that the revenue of the State would be augmented by about 40 crores of rupees. Thus from the budget speech of the Chief Minister, it becomes evident that by the proposed ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liament. Validity of legislation is not to be judged merely by affidavits filed on behalf of the State but by all the relevant circumstances which the court may ultimately find and more especially by what may be gathered from what the Legislature has itself said. 26.. The Supreme Court has reiterated the aforesaid principles again in the case of State of Tamil Nadu v. State of Karnataka reported in Judgment Today 1991 (2) SC 322. In this judgment, the Supreme Court has approvingly quoted the following passage from Francis Bannion's "Statutory Interpretation": "It is the function of the court alone to declare the legal meaning of an enactment. If anyone else (such as the draftsman of the provision) purports to lay down what the meaning is the court will tend to react adversely, regarding this as an encroachment upon its constitutional sphere." Another passage quoted reads as follows: "Under the British Constitution, the function of determining authoritatively the meaning of a parliamentary enactment is entrusted to the judiciary. In the words of Richard Burn they have the exposition of Acts, which must not be expounded 'in any other sense than is truly and properly the expos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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