TMI Blog2003 (7) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... ls and it dispatches the same to its ex-U.P. principals, namely, M/s. Tian Yuan India Pvt. Limited in accordance with the agreement dated April 2, 2001, annexure 1 to the writ petition. Earlier also the petitioner entered into similar agreements with the said company. 3.. By notice dated July 8, 2001 the consignment of mentha oil was detained by the respondent No. 3, Trade Tax Officer, Mobile Squad, Jhansi, and the driver of the vehicle was informed about it on July 9, 2001 by the notice dated July 8, 2001, annexure 2 to the writ petition, which has been issued under section 8-E of the Act. A perusal of the said notice shows that the detention has been made because the petitioner has not deducted the tax from the sellers/ agriculturists and has not deposited the same. 4.. The petitioner sent a reply on July 11, 2001 stating that the purchase of mentha oil was for and on behalf of ex-U.P. principals from the agriculturists and all documents accompanying the consignment clearly established this fact. Section 8-E of the Act states as follows: "Deduction by agent.-Every agent referred to in sub-clause (v) of clause (c) of section 2 who for the dealer residing outside the State, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods accompanying the documents cannot be detained under section 13-A. The petitioner has relied on the decision of this Court in Shaw Scott Distilleries Private Ltd. v. Sales Tax Officer [1983] 54 STC 344 (All.); 1983 UPTC 387. In that decision it was held that the provisions of section 13-A made it clear that the power to seize goods is conferred upon an officer authorised in that behalf where either the goods cannot be traced to any bona fide dealer or where it is doubtful if the goods are properly accounted for. It is alleged that these two conditions do not exist in the present case, and hence the detention is illegal. 9.. The petitioner has alleged that a provision similar to section 8-D was considered by the Supreme Court in Steel Authority of India v. State of Orissa [2000] 118 STC 297; 2000 UPTC 374 and the Supreme Court has struck down section 13-AA of the Orissa Sales Tax Act which provided for deduction of 4 per cent as TDS in respect of payment made to the contractors. The judgment of the Supreme Court is annexure 5 to the writ petition. Similarly in Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306 (SC); 2000 UPTC 459 a similar provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y covered by the decisions of the Supreme Court in Steel Authority of India Limited v. State of Orissa [2000] 118 STC 297; 2000 UPTC 374 and Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306; 2000 UPTC 459. In both these decisions similar provisions for deduction of 4 per cent were struck down on the ground that these provisions made no distinction between interState or export sale/purchase on the one hand, and intra-State sale/ purchase on the other. 16.. Shri Agarwal submitted that if section 8-E had provided that it will not apply to inter-State, outside, or export, sales/ purchases then it is possible that it could have been held to be a valid provision. However, he submitted, a careful perusal of section 8-E shows that it applies to all kinds of sales and purchases, whether intra-State, inter-State, outside or export, and in every case there has to be 4 per cent deduction. 17.. Learned counsel, relying on the Supreme Court decision in Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhati [1992] 87 STC 196; 1992 UPTC 971, submitted that the U.P. Legislature has no jurisdiction to legislate on a sale or purchase in the course of inter-State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states: "Provided that a person who sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as an owner, usufructuary mortgagee, tenant, or otherwise, or who sells poultry or dairy products from fowls or animals kept by him shall not, in respect of such goods be treated as a dealer." 20.. However, though the farmer/agriculturist, not being a dealer, may not be liable to pay sales tax under the Act, the petitioner as a dealer is certainly liable to pay purchase tax in view of section 3(1) of the Act which states: "Liability to tax under the Act.-(1) Subject to the provisions of this Act, every dealer shall, for each assessment year, pay a tax at the rates provided by or under section 3-A, or section 3-D on his turnover of sales or purchases or both, as the case may be which shall be determined in such manner as may be prescribed." 21.. It may be noticed that section 3 of the Act imposes tax on not only sales but also on purchases. Since the petitioner is purchasing the goods from the farmers/agriculturists, and he is a dealer within the meaning of definition in section 2(c), the petitioner is certainly liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved in Anderson v. Wilson 289 US 20: "We do not pause to consider whether a statute differently conceived and framed would yield results more consonant with fairness and reason. We take this statute as we find it." 26.. There are various provisions in various taxing statutes which provide for deduction at source, e.g., under the Income-tax Act, Sales Tax Act, etc., and the validity of all these provisions have been upheld. Hence section 8-E is not a new concept in tax law. It was made by the Legislature in its wisdom for more efficient mechanism for collection of tax. This court cannot sit as a court of appeal over the wisdom of the Legislature as long as the Legislature is acting within its legislative competence. 27.. Sales and purchase tax are mentioned in entry 54 of List II of the Seventh Schedule to the Constitution which states: "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I." 28.. It is well-settled that the entries in the Lists in the Constitution should be given the widest scope of their meaning vide Sri Ram Ram Narain Medhi v. State of Bombay AIR 1959 SC 459 (vide para 12); Banarasi Dass v. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruck down in view of the Supreme Court decisions in Steel Authority of India Limited v. State of Orissa [2000] 118 STC 297; 2000 UPTC 374 and Nathpa Jhakri's case [2000] 118 STC 306; 2000 UPTC 459. Under entry 92A of List I of the Seventh Schedule, inter-State sales can only be taxed by Parliament, but, it is submitted, section 8-E makes no distinction between intra-State sales and inter-State sales. 32.. We have carefully considered the aforesaid decisions of the Supreme Court. In Steel Authority of India Limited case [2000] 118 STC 297; 2000 UPTC 374, it has been observed by the Supreme Court (vide paragraph 15) that: "Section 13AA of the Orissa Sales Tax Act should have been precisely drafted to make it clear that no tax was levied on that part of the amount credited or paid that related to inter-State sales, outside sales and sales in the course of import ........." 33.. A careful perusal of the above two decisions, namely, Steel Authority of India Limited case [2000] 118 STC 297 (SC); 2000 UPTC 374 and Nathpa Jhakri's case [2000] 118 STC 306; 2000 UPTC 459 shows that the Supreme Court was not invited to consider, nor did it actually consider, the principle of statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 1959 was violative of article 30 of the Constitution. A plain and literal interpretation of the provision would make it violative of article 30 of the Constitution, and hence the Supreme Court narrowed down the scope of the said rule so as to sustain its validity. 38.. Similarly in Sunil Batra v. Delhi Administration AIR 1978 SC 1675 (vide para 38) another Constitution Bench decision, the Supreme Court observed: "Constitutional deference to the Legislature and the democratic assumption that people's representatives express the wisdom of the community lead courts into interpretation of statutes which preserves and sustains the validity of the provision." 39.. There is always a presumption that the Legislature does not exceed its jurisdiction vide Union of India v. Elphinstone Spinning and Weaving Co. Ltd. AIR 2001 SC 724 (page 733), State of Bihar v. Bihar Distillery Ltd. AIR 1997 SC 1511 (1519), etc. 40.. It follows from the above principle that if one construction of the statute will make it ultra vires whereas another construction will sustain its constitutional validity the court should prefer the latter, on the ground that the Legislature is presumed not to have inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar Nath Singh v. State of Bihar AIR 1962 SC 955 and the Supreme Court took a narrow construction of section 124A of the Indian Penal Code so as to avoid making it unconstitutional in view of articles 19(1)(a) and 19(2) of the Constitution. 43.. Section 124A of the Indian Penal Code which relates to sedition makes a person punishable who "by words, either spoken or written or by signs or visible representation or otherwise, brings or attempts to bring into hatred or contempt, or excites or attempts to excite disaffection towards the Government established by law". 44.. A perusal of the above provision shows that if it is construed in a plain or wide manner it will violate article 19(1)(a) and 19(2) of the Constitution. Hence, the Supreme Court, in order to make the provision constitutionally valid, limited the scope "to acts involving intention or tendency to create disorder or disturbance of law and order or incitement to violence." 45.. Sinha, C.J. speaking for the court in that decision observed: "It is well-settled that if certain provisions of law, construed in one way would make them consistent with the Constitution, and another interpretation would render them unconsti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al construction of the clause would have brought it in conflict with article 31(2) of the Constitution, and hence the narrower construction was adopted. 51.. In Indian Oil Corporation v. Municipal Corporation, Jullundhar AIR 1993 SC 844, section 113 of the Punjab Municipal Corporation Act, 1976 which empowered the Corporation to levy octroi on articles and animals "imported into the city" was read down to mean articles and animals "imported into the municipal limits for purposes of consumption, use or sale", since a wide construction would have made the provision unconstitutional being in excess of the power of the State Legislature conferred by entry 52 of List II of the Seventh Schedule. 52.. In Union of India v. Elphinstone Spinning and Weaving Co. Ltd. AIR 2001 SC 724 (733), the Supreme Court observed: "It is also a cardinal rule of construction that if one construction being given statute will become ultra vires the powers of the Legislature whereas on another construction which may be open, the statute remains effective and operative then the court will prefer the latter, on the ground that the Legislature is presumed not to have intended an excess of jurisdiction." 53. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutional should be adopted, even if straining of language is necessary." 56.. In Rayala Corporation (P) Ltd. v. Director of Enforcement, New Delhi AIR 1970 SC 494 (vide paragraph 7) (which is also a Constitution Bench decision) the Supreme Court in order to validate the law took a view that whenever there is contravention by any person punishable under clause (a) or (b) of section 23D(1) of the Foreign Exchange Regulation Act, the Director of Enforcement must first initiate proceedings under the principal clause of section 23D(1), and he is empowered to file complaint in court only when he finds that he is required to do so in accordance with the proviso to section 23D(1). 57.. In Jothi Timber Mart v. Corporation of Calicut AIR 1970 SC 264 the Supreme Court observed (vide paragraph 6): "When the power of the Legislature with limited authority is exercised in respect of a subject-matter, but words of wide and general import are used, it may reasonably be presumed that the Legislature was using the words in regard to that activity in respect of which it is competent to legislate and to no other; and that the Legislature did not intend to transgress the limits imposed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's case [2000] 118 STC 306 (SC). Hence these two decisions are clearly distinguishable. 62.. A careful perusal of these two decisions also shows that there is no discussion therein about the aforesaid settled principle of interpretation which has been upheld in a plethora of Supreme Court decisions referred to above. 63.. There is a catena of Supreme Court decisions which have firmly laid down that a statute can be narrowly construed if that is necessary to sustain its constitutional validity, and these decisions were unfortunately not brought to the notice of the Supreme Court when it decided the cases of Steel Authority of India Limited [2000] 118 STC 297 (SC) and Nathpa Jhakri's case [2000] 118 STC 306. Most of these decisions are Constitution Bench decisions, that is, decisions of Benches larger than those which decided these two cases. 64.. In our opinion the validity of section 8-E can be sustained by giving it a narrow meaning so as to exclude from its purview inter-State, outside and export, sales/purchases. In other words, in our opinion, section 8-E will only apply to sales/purchases which are intra-State. 65.. As to when a sale will be intra-State and when it wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it will be declared by the court as ultra vires, but as long as it does not do so it is not for the court to sit in appeal over the wisdom of the Legislature. 70.. It must never be forgotten that the Legislature has been elected by the people, while Judges are not, and in a democracy it is the people who are supreme. No court should therefore strike down an enactment solely because it is perceived by it to be unwise. A Judge cannot act on the belief that he knows better than the Legislature on a question of policy, because he can never be justifiably certain that he is right. Judicial humility should therefore prevail over judicial activism in this respect. 71.. Judicial restraint is consistent with and complementary to the balance of power among the three independent branches of the State. It accomplishes this in two ways. First, judicial restraint not only recognises the equality of the other two branches with the judiciary, but also fosters that equality by minimising interbranch interference by the judiciary. In this analysis, judicial restraint may also be called judicial respect, that is, respect by the judiciary for the other coequal branches. In contrast, judicial ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng modern Judges, carried its influence with them to the Bench, as also did Mr. Justice Frankfurter. 77.. Thayer, who was a Professor of law at Harvard University, strongly urged that the courts must be astute not to trench upon the proper powers of the other departments of Government, nor to confine their discretion. Full and free play must be allowed to "that wide margin of considerations which address themselves only to the practical judgment of a legislative body". Moreover, every action of the other departments embodies an implicit decision on their part that it was within their constitutional power to act as they did. The judiciary must accord the utmost respect to this determination, even though it be a tacit one. 78.. This meant for Thayer-and he attempted to prove that it had generally meant to the courts-that a statute could be struck down as unconstitutional only "when those who have the right to make laws have not merely made a mistake, but have made a very clear one,-so clear that it is not open to rational question". After all, the Constitution is not a legal document of the nature of a deed of title or the like, to be read closely and construed with technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiat. Such an assertion of judicial power defeats responsibility from those on whom in a democratic society it ultimately rests. Hence rather than exercise judicial review courts should ordinarily allow Legislatures to correct their own mistakes wherever possible." 82.. Similarly in his dissenting judgment in New State Ice Co. v. Liebmann (1932) 285 US 262, Mr. Justice Brandeis, the renowned Judge of the U.S. Supreme Court, observed that the Government must be left free to engage in social experiments. Progress in the social sciences, even as in the physical sciences, depends on "a process of trial and error" and courts must not interfere with necessary experiments. 83.. In the same decision Justice Brandeis also observed: "To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be fraught with serious consequences to the Nation. (See also 'The Legacy of Holmes and Brandeis' by Samuel Kanefsky)." 84.. As Mr. Justice Holmes of the U.S. Supreme Court observed in his dissenting judgment in Tyson v. Banton 273 US 418 (at p. 447): "I am far from saying that I think this particular law a wise and rational provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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