TMI Blog1941 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... General Sales Tax Act assessed the respondents to the tax imposed by the Act both in respect of their purchases of groundnuts and their sales of groundnut oil and groundnut cake. The assessing authority regarded the business of manufacturing groundnut oil and groundnut cake as distinct from their business as buyers of groundnuts. 2. The Government of India Act, 1935, vests in the Central Legislature the power of imposing duties of excise on goods manufactured or produced in India, subject to certain exceptions which do not include the goods dealt in by the respondents. The power of imposing taxation on the sale of goods is given to the Provincial Legislatures. When the respondents first came into Court their case was that a tax on the sale of goods is in all cases an excise duty and therefore the Madras Legislature had exceeded its power in enacting the General Sales Tax Act. In view of the decision of the Federal Court In re The Central Provinces and Berar Act XIV of 1938, (1939) 1 M.L.J. (Supp.) 1 : (1939) 1 F.C.R. 18, where it was held that an Act of a Provincial Legislature levying a tax on retail sales of motor spirit and lubricants was not ultra vires the Provincial Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s contentions may be summarised as follows: (1) An excise duty implies only a tax on the manufacture or production of goods before they leave the hands of the manufacturer or producer and as such a tax can be imposed before any sale takes place, there is no conflict of power. The Federal Legislature has free scope to impose an excise duty before a sale takes place, leaving the Provincial Legislature the power to impose a tax when a sale in fact takes place. (2) The tax imposed by the Madras General Sales Tax Act is a tax on turnover and such a tax cannot be classified as an excise duty. (3) The rules framed under the Act are intra vires and the respondents have not been subjected to double taxation, the two sides of their business being quite distinct. (4) While a suit will lie for a declaration that the Act and the rules are ultra vires, if intra vires the validity of an assessment can only be raised before the tribunals constituted by the Act and not in a Court of law. 5. While not disputing that the rules fall within the scope of the Act, assuming the Act to be intra vires, the respondents join issue on all these contentions. The most important question is the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone. According to Blackstone, [Stephen's Commentaries (1928) edition, Vol. IV, page 420] and economists excise duties may be imposed at any stage from manufacture to consumption, as was pointed out in The Central Provinces Case (1939) 1 M.L.J. (Supp.) 1 : (1939) 1 F.C.R. 18, although Gwyer, C.J., maintained that the primary and fundamental meaning in English of an excise duty is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption and that the Government of India Act, 1935 did not intend to give the words 'duties of excise' an extended meaning. The learned Chief Justice of India observed (page 47): In my opinion the power to make laws with respect to duties of excise given by the Constitution Act to the Federal Legislature is to be construed as a power to impose duties of excise upon the manufacturer or producer of the excisable articles, or at least at the stage of, or in connexion with, manufacture or production and extends no further. 8. He did not, however, proceed to discuss the problem whether a tax on the first sale, that is, the sale by the manufacturer or producer, is a duty, imposed in connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Act. The relevant portion of that entry read as follows: 16. Excise, that is to say, the control of production, manufacture, possession, transport, purchase and sale of alcoholic liquor and intoxicating drugs and the levying of excise duties and licence fees on or in relation to such articles. 12. The learned Judge considered that there was no escape from the conclusion that the definition of excise in Entry No. 16 of the Devolution Rules and the expression duties of excise in Entry No. 40 of the Provincial List in the present Act bear a wide signification, and include all duties levied on the consumption of the excisable commodity in the Province at any stage from production to sale. He expressed his conclusion in these words (page 116): On a careful review of the whole question, I am therefore inclined to hold that Parliament intended: (1) That, as regards goods centrally excisable, taxes on their sale within the Province for purposes of consumption, when such taxes are in no way connected with their production, manufacture, etc., within the Province, but are imposed on their sale in the Province merely as existing articles of trade and commerce, should be exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but this does not mean that the Court is precluded from examining the judgment in The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia (1927) 38 Com.L.R. 408, in order to see whether they throw light on the meaning to be attached to the words excise duties used in the Government of India Act, 1935, and we consider that these judgments do render great assistance in solving the first of the problems with which this Court is now confronted. The Act of the South Australian Parliament imposed a tax of three pence on every gallon of motor spirit sold within the State (excluding spirits sold for delivery in or transportation to any place outside the State) and the vendor was authorised to add the amount of the tax to the price agreed to be paid. Six of the seven judges who constituted the Court were of the opinion that the Act was ultra vires, because it violated the power of the Commonwealth Parliament to impose duties of excise. With the one exception the learned Judges were all of the opinion that a tax on the first sale amounted to an excise duty. The basis of their decision was that a tax on the first sale was a tax on the production of the article. 15. In c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g direct reference to a sale so described as to be intimately related to production, is a matter which affects the producer as such, because it burdens the trade for which his production is the essential preparation. A tax laid expressly on the production alone of goods would affect every one who produced them even for personal use or consumption. But it is all one in reality whether the tax is expressed to be on production followed by sale, or, as here, on the sale immediately following production. 17. Higgins, J., also said that a tax on the sale of an article is a tax on the article itself and in accepting the definition in Mill's Political Economy, 4th Edition, Vol. II, page 434, that taxes on the sale of consumable commodities are simply taxes on those commodities . Starke, J., said the same thing. 18. The learned Advocate-General has accepted the proposition stated by the learned Chief Justice of India in The Central Provinces Case (1939) 1 M.L.J. (Supp.) 1 : (1939) F.C.R. 18, that a tax connected with the manufacture or production of goods within the Province constitutes an excise duty, and in our opinion, the correctness of the proposition is not open to doubt. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in reality a tax on sales. In this connection he has pointed to an argument advanced by the Advocate-General of India in The Central Provinces Case (1939) 1 M.L.J. (Supp.) 1 : (1939) 1 F.C.R. 18, to the effect that the only power given to the Provincial Legislature by Entry No. 48 is a power to impose a tax on turnover. The contention of the Government of India was that the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act constituted an infringement of the power of the Central Legislature and the argument of the learned Advocate-General of India was advanced in support of this contention. The Federal Court refused to accept the argument, but this does not mean that this decision implied that a tax on turnover does not mean a tax on sales. Under the Madras General Sales Tax Act, the tax is undoubtedly based on the dealer's turnover. Turnover is defined by Section 2 (1) as meaning the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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