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1971 (11) TMI 168

.R. Somanatha Iyer, and R.B. Datar, Advs. JUDGMENT 1. These two appeals by Special Leave, are horn the judgment dated November 16, 1966 of the Mysore High Court in S.T.R.P. No. 52 of 1965 and Writ Petition No. 2349 of 1965. 2. The appellant was a dealer, among other things, in textiles, with its head office at Mercara and a branch at Bangalore. It was assessed to sales tax on April 29, 1965 under the Mysore General Sales Tax Act, 1957, on its turnover for the period from October 1, 1957 to March 31, 1958. The question in dispute was whether the turnover of ₹ 3,87,200 estimated to be 'the value of the stock of mill cloth held by the Appellant on December 14, 1957 was exigible to tax. The contention of the Appellant before the assessing authority was that the turnover related to mill cloth on which the additional excise duty was not payable and therefore not paid and so the turnover was exempt from sales tax. The contention was rejected. The Appellant appealed to the Deputy Commissioner of Commercial Taxes. The appeal was dismissed. Its further appeal to the Sales Tax Appellate Tribunal also proved unsuccessful. 3. The Appellant took the matter in revision to the Mysore Hig .....

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e year relating to such goods may be. 8. The existing Section 8 of the Act was re-numbered as Sub-section (1) thereof and continued to read as follows :- No tax shall be payable under this Act on the sale of goods specified in the Fifth Schedule subject to the conditions, and exceptions, if any, set out therein. 9. The following Sub-section (2) was added by Amending Act No. 9 of 1958 to Section 8 :- (2) Subject to the provisions of Sub-section (1) in respect of the sale or purchase of the goods mentioned in items 1, 2, 3, 4, 5, 6, 7, 27, 28, 29, 30, 31, 32 and 42 of the Second Schedule acquired by a dealer on or after the fourteenth day of December, 1957, on which the said excise duty is not payable shall be exempt from the tax payable under this Act. 10. Entry No. 8A in the Fifth Schedule in the Amending Act No. 9 of 1958 was to have effect from 1-4-58. The entry reads :- 8A. All varieties of textiles, namely, cotton, woollen or silken including, rayon, art silk or nylon, whether manufactured by handloom, powerloom or otherwise but exclusive to pure silk. 11. In Writ Petition No. 368 of 1961, the Mysore High Court considered the effect of these amendments. Applying the principle e .....

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Court over-ruled the contention and held that the tax imposed was on actual sales and not on deemed or fictitious ones. The Court also held :- It will be remembered that the position as stated in the judgment of this Court in Writ Petition 368 of 1961 was that the total effect of the amendment was to give paramount operation or importance to Sub-section (1) of Section 8 which was a categorical statement of exemptions. The opening words of Sub-section (5A), as then inserted, also included the expression subject to Sub-section (1) of Section 8. The said expression was totally deleted when by the subsequent amendment a new text was substituted for Sub-section 5A. Another important circumstance is that, whereas Sub-section 5A as originally introduced contained the words "on which excise duty or additional excise duty levied by the Central Government with effect from the fourteenth day of December 1957, has not been paid", no such words are found in the text of the substituted Sub-section 5-A. On the contrary, the position was simplified by stating that tax will be levied in respect of sales or purchases, as the case may be, relatable to the stock held by the dealer on 14-12- .....

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assessment here even if during that period it had the power to do so. Counsel submitted that even though textiles were not declared goods during the assessment period namely from October 1, 1957 to March 31, 1958 and the State Legislature was competent to levy sales tax at a rate higher than that specified in Section 15 of the Central Sales Tax Act as it then stood, the Legislature lost that power the moment textiles became declared goods and that its power to tax sales of textiles became restricted to 2% at the time of the enactment of Act No. 9 of 1964 and therefore even for the assessment period it could not have passed a law imposing tax at a rate in excess of two per cent. In support of this proposition, counsel relied upon certain observations in A Hajee Abdul Shakoor and Company v. State of Madras [1964]8SCR217 ; one of the questions which this Court had to consider in that case was whether the Madras Legislature was competent to enact the provisions of Sub-section (1) of Section 2 of the Madras General Sales Tax (Special Provisions) Act, 1963. Hides and skins had been declared under Act LII of 1952 to be essential for the life of the community. Article 286(3) of the Constit .....

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to the Act. It was because textiles became declared goods from April 1, 1958 that the Mysore Legislature lost its power to tax the sales of textiles at a rate higher than that specified in Section 15 of the Central Sales Tax Act, as it stood at the relevant time. Though the goods on the sale of which tax was imposed remained the same in substance, their legal quality became different. As textiles were not declared goods before April 1, 1958, there was no inhibition on the part of the Mysore Legislature in subjecting the turnover of sales of textiles before that period to a tax higher than that specified in Section 15 of the Central Sales Tax Act. 20. The matter can be looked at from a different angle. As we have already indicated, by virtue of Section 5(5) of the Act No. 9 of 1964, the substituted Sub-section (5A) was deemed to have been in the Mysore General Sales Tax Act always. The only limit on the power of a legislature to create a fiction is that it should not transcend its power by its creation. The limitation on the power of the legislature of Mysore in 1964 when it enacted Act No. 9 of 1964 was that on the sale of declared goods it could not have imposed sales tax at a rat .....

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