TMI Blog2017 (10) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... NO. 8502 OF 2011 CIVIL APPEAL NO. 8617 OF 2014 CIVIL APPEAL NOS. 10374-10379 OF 2014 R.F. Nariman And Sanjay Kishan Kaul, JJ. JUDGMENT R.F. Nariman, J. 1) This batch of cases concerns Pan Masala containing tobacco and Gutka and their taxability under three State legislations, namely, the Delhi Sales Tax Act, 1975, the U.P. Trade Tax Act, 1948 and the Tamil Nadu General Sales Tax Act, 1959. The central question raised in all these appeals is the same. We shall first take up the Delhi case. 2) Under the Delhi Sales Tax Act, 1975, all sales (of goods) that are effected after the commencement of the Act, are made to suffer tax under Section 3(1) of the Delhi Act, whose marginal note reads incidence of tax . Section 3 (1) states as under:- 3. Incidence of Tax (1) Every dealer whose turnover during the year immediately preceding the commencement of this Act exceeds the taxable quantum and every dealer who at the commencement of this Act, is registered or is liable to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) shall be liable to pay tax under this Act on all sales effected by him on or after such commencement. The obverse side of inci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupee;] [(ccc) [***] (d) in the case of taxable turnover of any other goods, at the rate of eight paise in the rupee: [PROVIDED that the Lieutenant Governor may, by notification in the Official Gazette, add to, or omit from, or otherwise amend, the First Schedule, the Second Schedule or the Fourth Schedule, either retrospectively or prospectively, and there upon the First Schedule or the Second Schedule or, as the case may be, the Fourth Schedule, shall be deemed to be amended accordingly:] PROVIDED FURTHER that no such amendment shall be made retrospectively if it would have the effect of prejudicially affecting the interests of any dealer: PROVIDED ALSO that in respect of any goods or class of goods if the Lieutenant Governor is of the opinion that it is expedient in the interest of the general public so to do, he may, by notification in the Official Gazette, direct that the tax in respect of taxable turnover of such goods or class of goods shall, subject to such conditions as may be specified, be levied at such modified rate not exceeding the rate applicable under this section, as may be specified in the notification. (2) For the purpose of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate of registration of such dealer, other than goods specified in the Third Schedule, intended for sale or resale; (vi) such other sales as are exempt from payment of tax under section 66 or as may be prescribed: PROVIDED that no deduction in respect of any sale referred to in sub-clause (iv) shall be allowed unless the goods, in respect of which deduction is claimed, are proved to have been sold by the dealer within a period of twelve months from the date of his registration and the claim for such deduction is included in the return required to be furnished by the dealer in respect of the said sale: [PROVIDED FURTHER that no deduction in respect of any sale referred to in sub-clause (v) shall be allowed unless a true declaration duly filled and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars in the prescribed form obtainable from the prescribed authority in the manner and subject to such condition as may be prescribed is furnished in the prescribed manner and within the prescribed time, by the dealer who sells the goods:] PROVIDED ALSO that where any goods are purchased by a registered dealer for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (6) if other than flue cured and not otherwise specified. Four rupees (7) if used for agricultural purposes Nil (8) stalks. One rupee ninety paise. II. Manufactured tobacco- (1) Cigars and cheroots. Twenty-five rupees per hundred (2) Cigarettes. Two hundred and fifty percent. ad valorem . (3) (i) Biris in the manufacture of which any process has been conducted with the aid of machines operated with or without the aid of power. Three rupees and eighty paise per thousand (ii) other biris Eighty paise per thousand (4) Smoking mixtures for pipes and cigarettes. Two hundred percent. ad valorem (5) Chewing tobacco. Ten per cent. ad valorem (6) Snuff. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supp. (2) SCC 639 and State of Bihar and Others vs. Krishna Kumar Kabra and Another, (1998) 108 STC 1. Whereas the Kothari Products (supra) line of judgments had held that an entry under a sales tax statute which only specifies rate cannot be used to eat into an exemption entry, the Agra Belting Works (supra) line of judgments states the exact opposite, which is that the charging section, the rate of tax section, and the exemption section all form part of one scheme, and when a notification is issued under a rate of tax section, which is subsequent to a notification exempting certain goods, the intention of the legislature is that such exemption then gets withdrawn and makes the sale of such goods liable to tax. The High Court preferred to follow the Agra Belting Works (supra) line, and therefore, dismissed the writ petition of the assessees. 6) To similar effect are the impugned judgments from the Allahabad and Madras High Courts which are contained in C.A. No. 8617/2014 and C.A. No. 8502/2011. It may only be noted that in the Madras High Court judgment, though this point was squarely raised and argued, the Madras High Court has preferred to rest its decision on only one point, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was referred to and relied upon by the Delhi High Court in the impugned judgment dated 05.11.2004, as follows: 15. The High Court seems to have brushed aside the argument of the appellant by merely focusing on the general principle that when there are two taxing entries one general and the other specific then the specific entry would have to be given priority as compared to the general entry. In our view, this principle has no application in the facts of the present appeal as it was not a case of goods being exigible to tax under two entries. On the other hand, the appellant s case is one where the goods had been granted a special exemption provided they were already subjected to tax under the ADEA. The High Court fell into the error of assuming that the problem presented to it with regard to exemption could be solved by resort to the general principle of specific entry versus general entry of a taxable head. More importantly, the Revenue s contention that when an exemption has already been granted, if the State legislature amended Schedule I, which only deals with the rate of tax, such amendment would take away exemption of tax of the same goods, was directly tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one as follows: 6. As has been pointed out above, Section 3 is the charging provision; Section 3-A authorises variation of the rate of tax and Section 4 provides for exemption from tax. All the three sections are parts of the taxing scheme incorporated in the Act and the power both under Section 3-A as also under Section 4 is exercisable by the State Government only. When after a notification under Section 4 granting exemption from liability, a subsequent notification under Section 3-A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under Section 3-A, we see no force in the contention of the assessee which has been upheld by the High Court. In fact, the second notification can easily be treated as a combined notification-both for withdrawal of exemption and also for provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llah v. Kowsher Ali, (1926) 54 Cal 266, Sanderson C.J., stating the practice in Calcutta, seems to have been of opinion that a decision of a Full Bench could only be reversed by the Privy Council or by a bench specially constituted by the Chief Justice. Even if this be the true rule, there is nothing to show that the Chief Justice acted upon it in Emperor v. Purshottam Ishwar (1921) 45 Bom 834. I do not recollect myself ever to have constituted a Special Bench to consider the ruling of a Full Bench, though I have constituted many Full Benches to consider rulings of Division Benches. However, I need not pursue this subject further, since, for the purpose of the present appeal, I am prepared to assume that an alternative charge of perjury lies, and that it was a charge of that nature which the learned Additional Sessions Judge contemplated. The question then is whether it is expedient in the interests of justice that such a charge should be made. 11) This conundrum was also addressed by M.B. Lokur, J. in Supreme Court Advocates-on-Record Association and Another vs. Union of India, (2016) 5 SCC 1 at 577-578 as follows: 669. One of the more interesting aspects of Pradeep Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court Advocates-on-Record (supra). 13) Let us consider a hypothetical example, where a 2 Judge Bench has laid down the law in a particular way. If nine other 2 Judge Benches have followed the first 2 Judge Bench decision, is it open for three learned Judges to overrule all of the 2 Judge Benches i.e. twenty learned Judges? The obvious answer would be yes, because the 3 Judge Bench is really overruling the first 2 Judge Bench decision, which was merely followed by nine other 2 Judge Benches. As against this, however, if a unanimous 5 Judge Bench decision is overruled by a 7 Judge Bench, with four learned Judges speaking for the majority, and three learned Judges speaking for the minority, can it be said that the 5 Judge Bench has been overruled? Under the present practice, it is clear that the view of four learned Judges speaking for the majority in a 7 Judge Bench will prevail over a unanimous 5 Judge Bench decision, because they happen to speak for a 7 Judge Bench. Has the time come to tear the judicial veil and hold that in reality a view of five learned Judges cannot be overruled by a view of four learned Judges speaking for a Bench of 7 learned Judges? This is a que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be accepted as correct. We cannot accept any line of reasoning which would show it to be wrong. We cannot therefore accept the reasoning of a minority of two Lord Simon of Glaisdale and Lord Salmon on the law. It must be wrong because it led them to the wrong result. (2) We ought to accept the reasoning of the three in the majority if we can discover it. But it is not discoverable. The three were divided. Lord Reid and Lord Morris of Borth-y-Gest took one view of the law. Lord Pearson took another. We cannot say that Lord Reid and Lord Morris of Borth-y- Gest were correct, because we know that their reasoning on the law was in conflict with the reasoning of the other three. We cannot say that Lord Pearson was correct because we know that the reasoning which he accepted on the law led the other two (Lord Simon of Glaisdale and Lord Salmon) to a wrong conclusion. So we cannot say that any of the three in the majority was correct. (3) The result is that there is no discernible ratio among the majority of the House of Lords. In these circumstances I think we are at liberty to adopt the reasoning which appears to us to be correct. In my opinion we should adopt the reasoning ..... 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