TMI Blog1994 (6) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... in List III. The State Legislature, on the other hand, has exclusive power to legislate with respect to matters in State List II minus matters falling in Lists I and III and has concurrent power, with respect to matters included in List III. It is to be noted here that the distribution, as between Union and States, of legislative power, as is being provided for under article 246, is conferred by article 245. 3.. Article 245(1) prescribes: "Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State." 4.. Article 245(2) provides: "No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation." 5.. Article 246 therefore must have to be read as, "Subject to the other provisions of the Constitution". The legislative powers of the Legislatures of Union and States, thus being limited by the provisions, relating to distribution of powers and other mandatory limitations, imposed by different provisions of the Constitution, a law passed without legislative competence is a null ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t into force with effect from October 1, 1958. The levy of tax on inter-State sales under this Act commenced from July 1, 1957. 10.. Pertinent it is to mention at this juncture, the objects and reasons of this Act, which is reflected as under. "Objects and reasons of the Act.-Certain amendments were undertaken in the Constitution by the Constitution (Sixth Amendment) Act, 1956, whereby- (a) taxes on sales or purchases of goods in the course of inter-State trade or commerce were brought expressly within the purview of the legislative jurisdiction of Parliament; (b) restrictions could be imposed on the powers of State Legislatures with respect to the levy of taxes on the sale or purchase of goods within the State where the goods are of special importance in inter-State trade or commerce. The Amendments at the same time authorised Parliament to formulate principles for determining when a sale or purchase takes place in the course of inter-State trade or commerce or in the course of export or import outside a State in order that the legislative spheres of Parliament and State Legislatures become clearly demarcated. In the case of goods of special importance in inter-State tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary provisions have, therefore, been made in different Chapters of the Bill incorporating the principles stated above." 11.. Section 3, by way of legal fiction, prescribes circumstances and situations, in which a sale or purchase of goods, is said to take place in the course of inter-State trade or commerce. It reads as under: "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.-Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed particulars in a prescribed form obtained from the prescribed authority; and (b) if the subsequent sale is made- (i) to a registered dealer, a declaration referred to in clause (a) of subsection (4) of section 8, or (ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of sub-section (4) of section 8: Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods, if,- (a) the sale or purchase of such goods is, under the sales tax law of the appropriate State, exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name); and (b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (A) or clause (B) of this sub-section." (ii) Section 9 dealing with levy and collection of tax and penalties reads as under: "9. Levy and collection of tax and penalties.-(1) The tax payable by any dealer un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments furnished by a dealer as confidential, shall apply accordingly Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf, make necessary provision for all or any of the matters specified in this sub-section. (2-A) All the provisions relating to offences and penalties (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for an offence but excluding the provisions relating to matters provided for in sections 10 and 10-A) of the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, reassessment, collection and the enforcement of payment of any tax required to be collected under this Act in such State or in relation to any process connected with such assessment, reassessment, collection or enforcement of payment as if the tax under this Act were tax under such sales tax law. (3) The proceeds in any financial year of any tax, including any penalty, levied and collected under this Act in any State (other than a Union Territory) on behalf of the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the stocks of goods of, purchases, sales and deliveries of goods by, any dealer or any other information relating to his business as may be necessary for the purposes of this Act; (d) the inspection of any books, accounts or documents required to be kept under this Act, the entry into any premises at all reasonable times for the purposes of searching for any such books, accounts or documents kept or suspected to be kept in such premises and the seizure of such books, accounts or documents; (e) the authority from whom, the conditions subject to which and the fees subject to payment of which any form of certificate prescribed under clause (a) of the first proviso to sub-section (2) of section 6 or of declaration prescribed under sub-section (1) of section 6A or sub-section (4) of section 8 may be obtained, the manner in which such forms shall be kept in custody and records relating thereto maintained and the manner in which any such form may be used and any such certificate or declaration may be furnished; (ee) the form and manner in which, and the authority to whom, an appeal may be preferred under sub-section (3H) of section 7, the procedure to be followed in hearing such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and incidental charges; (f) extract of the ledger account of the principal maintained in the books of the agents duly signed by such agents; (g) copies of railway receipts or lorry receipts under which the goods were so despatched; and (h) a register showing the date and mode of remittance of the amount to the principal." 18.. By Notification in GSR No. 56(E) dated February 9, 1973, sub-rule (5) to rule 12 had been inserted to the Turnover Rules and it reads as under: "(5) The declaration referred to in sub-section (1) of section 6A shall be in form 'F': Provided that a single declaration may cover transfer of goods, by a dealer, to any other place of his business or to his agent or principal, as the case may be, effected during a period of one calendar month: Provided further that if the space provided in form 'F' is not sufficient for making the entries, the particulars specified in form 'F' may be given in separate annexures attached to that form as long as it is indicated in the form that the annexures form part thereof and every such annexure is also signed by the person signing the declaration in form 'F': Provided further that form 'F' in force before the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................ The above statements are true to the best of my knowledge and belief. (Signature) (Name of the person signing the declaration) *(Status of the person signing the declaration in relation to the transferee) *(Status of the person signing the declaration in relation to the transferor) Date.............................. *Strike out whichever is not applicable. Note- On the Counterfoil ... To be retained by the transferee On the Duplicate ... To be retained by the transferor On the Original ... To be furnished to the assessing authority in accordance with rules framed under section 13(4)(e)." (This form is in triplicate, identical, except for the 'Note' below as indicated above) 20.. Section 6A of the Central Act had been inserted by Amending Act 61 of 1972. The reasons for the said enactment will become apparent from a perusal of the following Statement of Objects and Reasons appended for the insertion of a such provision: "Central sales tax is not leviable in respect of transactions of transfer of goods from a head office or a principal to a branch or an agent or vice versa as these do not amount to sales. This aids evasio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (4) of section 8, which he knows, or has reason to believe, to be false................................... he shall be punishable with simple imprisonment which may extend to six months, or with fine, or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues." This amendment, by substitution also came into effect on and from April 1, 1973. 23.. By section 5 of the Constitution (Forty-sixth Amendment) Act, 1982, entry 92-B in List I of the Seventh Schedule had been inserted and it reads as below: "92-B. Taxes on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce." 24.. By section 2 of the aforesaid Amendment Act, in article 269, which deals with "taxes levied and collected by the Union, but assigned to the States", sub-clause (h) to clause (1) had been inserted and it is couched in the following terms: "269(1). The following duties and taxes shall be levied and collected by the Government of India but shall be assigned to the States i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade or commerce. (3) Rule 12(5) of the Central Rules prescribed declaration in form 'F', in order to activate the methodology of proof, as contemplated by section 6-A of the Central Act. (4) No Central legislation had been enacted, consequent to the insertion of sub-clause (h) of clause (1) of article 269 of the Constitution and entry 92-B in List I of the Seventh Schedule, empowering the Union Government for the imposition of tax on the consignment of goods (whether the consignment is to the person making it or to any other person), where such consignment takes place in the course of inter-State trade or commerce and consequently, such imposition of tax either by the Union Government or by the respective State Governments is not permissible. 28.. In the backdrop and setting of the legal position as above, the respective petitioners-assessees, involved in the movement of goods to other States in the course of inter-State trade or commerce, resorted to the present actions challenging the validity of rule 4(3A) of the Tamil Nadu Rules, besides filing WMPs, either praying for stay of further proceedings or for injunction restraining the competent assessing authorities concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) There cannot be two voices spoken to on the same subject-matter, namely, movement of goods from one State to another in the course of interState trade or commerce, one by the Union Government and another by the State Government, in the shape of statutory provisions and rules inconsistent with each other and rule 4(3A) of the Tamil Nadu Rules in the present shape cannot at all be stated to be not inconsistent with the statutory provisions of section 6A of the Central Act and rule 12(5) made thereunder, prescribing a declaration in form "F", followed it up by a penal provision, in the shape of section 10(a) for non-compliance of those provisions, which form by themselves a complete code, tackling such a situation and in the face of such glaring inconsistencies, the pre-existing rule 4(3A) of the Tamil Nadu Rules must, in such a situation, be deemed to have been impliedly repealed and consequently it is not enforceable. (4) In any event, the said rule, even if construed to be not mandatory, but directory only and therefore, it can co-exist, along with section 6A, in the sense of supplanting and supplementing the methodology of proof, as contemplated by it, even then, the non-compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imately, a concluded sale took place in the State where the goods were sent and that State is different from the State, from which the goods moved. If these conditions are satisfied, as already indicated, then, by virtue of section 9 of the Central Act, it is the State, from which the goods moved, which would be competent to levy tax under the provisions thereof. Thus, the interState sale of goods of description, as mentioned in section 3 alone is taxable or chargeable under section 6. 34.. Under sub-section (1) of section 13, rule-making power inhering in favour of the Central Government had initially not at all been invoked in making any rules thereunder, in respect of movement of goods involved in inter-State sale and in respect of the same subject, the State Government had been empowered under sub-clauses (3) and (4) of section 13, to make rules for carrying out the purposes of the Central Act. While such a power had been conferred on the State Government, precaution had been taken to incorporate provisions in those subsections that the rules, that were to be made by the State Government should not be inconsistent with the provisions of the Central Act and the Rules made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f declaration in form "F" is not compulsive or mandatory. It is open to the dealer to discharge the burden of proof cast on him in any other manner by adducing other evidence. In case where the dealer exercises the option of furnishing declaration in form "F", the only further requirement is that the assessing authority should be satisfied, after making such enquiry as he may deem necessary, that the particulars contained in the declaration so furnished by the dealer are true. It is only then the assessing authority is enjoined to pass an order in the matter. 38.. A plain reading of section 6A(2) points out that in case where the dealer exercises option of furnishing declaration in form "F ", the only further requirement is that the assessing authority should be satisfied, after making such enquiry, as he may deem necessary, that the particulars contained in the declaration furnished by the dealer are true. The scope or frontiers of the enquiry by the assessing authority is limited to this extent, namely, to verify whether the particulars contained in the declaration in form "F' furnished by the dealer are true. It means that the assessing authority can conduct an enquiry to find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rements therein are not in any way repugnant to or inconsistent with the provisions, as adumbrated under section 6A and rule 12(5), in the sense of they accordingly aiding, supplementing or supplanting by production of the materials required for the proof of determining the question of branch transfer or otherwise. Further, the rudiments of rule 4(3A) requiring furnishing of certain materials cannot at all be stated to be defining agency, different from the common law concept of "agency", as had been provided for under chapter X of the Contract Act. The materials required to be produced by the said rule are only towards the proof of the factum of existence of an agency or not, thereby accepting the concept of "agency", as had been provided for under the Contract Act. Such being the case, to say that the said rule defines "agency", contrary to the concept of "agency", as contemplated under the Contract Act, when especially there is no special definition of "agency" in the Central Act cannot at all be countenanced. 41.. A vain attempt had also been made that the provisions of rule 4(3A) had been impliedly overruled by the subsequent enactment of the provisions, in the shape of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same would, in our opinion, attract the incident of the saving found in section 6 for the rules of construction embodied in the General Clauses Act are, so to speak, the basic assumptions on which statutes are drafted." 43.. Their Lordships of the Supreme Court in another Constitution Bench decision, namely, Northern India Caterers (Private) Ltd. v. State of Punjab AIR 1967 SC 1581, in paragraph 6 (page 1584) expressed thus: "The rule of construction is that where a statute provides in express terms that its enactment will repeal an earlier Act by reason of its inconsistency with such earlier Act, the latter may be treated as repealed. Even where the later Act does not contain such express words, if the co-existence of the two sets of provisions is destructive of the object with which the later Act was passed, the court would treat the earlier provision as impliedly repealed. A later Ad which confers a new right would repeal an earlier right if the fact of the two rights co-existing together produces inconvenience, for, in such a case it is legitimate to infer that the Legislature did not intend such a consequence. If the two Acts are general enactments and the later of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Mrs. Chitra Venkataraman, learned Additional Government Pleader (Taxes) also rose to the occasion in a splendid way in meeting those submissions, emerging from those learned counsels, by way of sharp and incisive analysis of various legal provisions and thereby rendered valuable assistance to the court in arriving at just and proper conclusion. Equally so is the effort made by Mr. K. Ramagopal, learned counsel acting as amicus curiae on open invitation extended by court, in assisting the court. Mr. T. Srinvasa Moorthy, learned Additional Central Government Standing Counsel made his presence felt in stating that since none of learned counsel appearing for the petitioners-assessees did challenge the validity of either of the provisions of the Central Act or the Rules made thereunder, there was nothing for him to make any submission by way of reply, except to tread on the path chosen by Mrs. Chitra Venkataraman, learned Additional Government Pleader (Taxes). 48.. In view of the discussions as above, the following positions emerge: (1) Rule 4(3A) of the Tamil Nadu Rules, being a machinery provision, is only directory in nature; but not mandatory. (2) There is no conflict, repu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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