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TMI Blog1989 (10) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... Dadachanji & Co., with him), for the appellant in C.A. Nos. 1166 to 1172 of 1985, petitioner in W.P. No. 3834 of 1985, and respondent in C.A, No. 1515 of 1984 and S.L.P. (Civil) Nos. 8397 to 8402 of 1983 (Goodyear India Ltd.) and the appellant in C.A. Nos. 1173 to 1177 of 1985 and respondent in C.A. No. 1512 of 1984 [Gedore Tools (P.) Ltd.].- Other Advocates : P.K. Ram, H.S. Anand, R. Karanjawala and Mrs. Manik Karanjawala, for the parties.- Dr. Debi Pal, Senior Advocate (A.N. Haksar, D.N. Misra, Ravinder Narain and S. Sukumaran, Advocates of J.B. Dadacahnji & Co., with him), for the appellants in C.A. No. 4163 of 1988 (Hindustan Lever Ltd.).- Senior Advocate : Kapil Sibal, for the parties.- S.K. Dholakia, Senior Advocate (A.M. Khanwilkar and A.S. Bhasme, Advocates, with him), for the respondents in C.A. Nos. 4162 and 4163 of 1988 (the State of Maharashtra).- D.S. Tewati, Senior Advocate (Mahabir Singh, Advocate, with him), for the appellants in C.A. Nos. 1512 and 1515 of 1984, petitioner in S.L.P. (Civil) Nos. 8397 to 8402 of 1983 and respondents in C.A. Nos. 1166 to 1177 of 1985, W.P. No. 3834 of 1985, C.A. No. 2674 of 1986 and C.A. Nos. 1633 of 1985 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and also sold locally against declaration form No. S.T. 15. It was stated that, at the relevant time, the local sales including sales in the course of inter-State trade and commerce and in the course of export from the State of Haryana was about 30 to 35 per cent. The appellant was a registered dealer both under the Haryana Act and the Central Sales Tax Act, and had been submitting its quarterly returns and paying sales tax in accordance with law. According to the appellant, in 1979, the assessing authority, Faridabad, imposed upon the appellant the purchase tax under section 9 of the Act for the assessment year 1973-74, and subsequently for the years 1974-75 and 1975-76, as well on the despatches made by the appellant of the manufactured goods to its various depots outside the State. Subsequently, the relevant Revenue authorities sought to impose purchase tax under section 9(l) of the Act and imposed purchase tax on despatches of manufactured goods, namely, tyres and tubes, to its various depots in other States. "his led to the filing various writ petitions in the Punjab and Haryana High Court by the appellant/petitioner. In respect of the assessment years 1976-77 to 1979-80, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Sales Tax Act, 1956, in the course of export out of the territory of India, (b) exports them, in circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15." The relevant notification was as follows: Notification No. S. O. 119/H.A. 20/73/Ss. 9 and 15/74 dated the 19th July, 1974.-In exercise of the powers conferred by section 9 and sub-section (1) of section 15 of the Haryana General Sales Tax Act, 1973, the Governor of Haryana hereby directs that the rate of tax payable by all dealers in respect of the purchases of goods other than goods specified in Schedules C and D or goods liable to tax at the first stage notified as such under section 18 of the said Act, if used by them for purposes other than those for which such goods were sold to them, shall be the rate of tax leviable on the sale of such goods : Provided that where any such dealer, instead of using such goods for the purpose for which they were sold to him, despatches such goods or goods manufactured therefrom at any time for consumption or sale ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly, 1974 (annexure P-2), plainly travels far beyond the parent section 9 of the Act. Whereas the said provision provided only for the levy of a purchase tax on the disposal of manufactured goods, the notification by making a mere despatch of goods to the dealers themselves taxable in essence, legislates and imposes a substantive tax which it obviously cannot. Indeed, its terms run contrary to and are in direct conflict with the provisions of section 9 itself. There is thus no option but to hold that the notification, which is a composite one, is ultra vires section 9 of the Act and is hereby struck down." The High Court also noted that though the challenged assessment orders were appealable, as the challenge was to the very validity of the notification which was obviously beyond the scope of the appellate authority, the writ petitions were entertainable as the assessment was based on the notification which was frontally challenged. As a result, the High Court quashed the notification and set aside the assessment orders. The said decision is under challenge in appeal to this court. It may be mentioned that sub-section (1) of section 9 of the Act had been introduced by the Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta India Ltd. In the meantime, the petitioner-company also filed writ petitions for the assessment years 1973-74 to 1975-76 and 1980-81, in the High Court challenging the assessments. The High Court decided these matters on August 2, 1983. The said decision, Bata India Ltd. v. State of Haryana, has been reported in [1983] 54 STC 226 (P & H). The High Court held that "mere despatch of goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce" is synonymous with or is in any case included within the ambit of the "consignment of goods either to the person making it or to any other person in the course of inter-State trade or commerce" as specified in article 269(1)(h) and entry No. 92-B of List I of the Seventh Schedule to the Constitution. Hence, the levy of sales or purchase tax on such a despatch or consignment of goods and matters ancillary or subsidiary thereto, will be within the exclusive legislative competence of Parliament to the total exclusion of the State Legislatures. Therefore, section 9(1)(b) of the Haryana General Sales Tax Act, 1973, as amended by the Haryana General Sales Tax (Amendment and Validatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same would come squarely within the wide sweep of entry No. 92B of list I of the Constitution, and thus excludes taxation by the States. The High Court was of the view that section 9 of the Act must be strictly construed as it was a charging section. If the charging section travels beyond the legislative entry and thereby transgresses the legislative field, then the same cannot possibly be sustained. The constitutional changes brought by the Forty-sixth Amendment in article 269 of the Constitution read with the insertion of entry No. 92B in the Union list leave no doubt that the legislative arena of tax on the consignment of goods (whether to one's own self or to any other person) in the course of inter-State trade or commerce and all ancillary or complementary or consequential matters are now declared to be exclusively reserved for parliamentary legislation and any intrusion into this field by the State Legislatures would be barred. In my opinion, the High Court correctly noted in the said decision that the provisions of constitutional change have to be construed and such problems should not be viewed in narrow isolationism but on a much wider spectrum and that the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinbefore, mentioned these factors. It is in this background that article 269 was amended and clause (3) was added to it. The effect, inter alia, is that the power to levy tax on the sale or purchase of goods is now referable to the legislative power vested in the States by virtue of entry No. 54 in list II of the Seventh Schedule. However, this legislative authority of the States is restricted by three limitations contained in articles 286(1)(a), 286(1)(b) and 286(3) of the Constitution. It may be mentioned that Parliament by the Sixth amendment to the Constitution, enacted the Central Sales Tax Act, 1956, with the object of formulating principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods shall be subject. In this connection, the High Court refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturer to himself or to any other person in the course of inter-State trade or commerce, and referred to the meanings of the expressions "despatch" and "consign", which are similar and almost inter-changeable when used in a specific commercial sense. The High Court referred to Webster's New International Dictionary, Shorter Oxford English Dictionary and also to Random House Dictionary for their meanings. On construction, the High Court came to the conclusion that the amended provisions of section 9(1)(b) of the Act attempt to levy an identical tax in, the garb of a levy on the despatch of manufactured goods to places outside the State of Haryana and, therefore, intruded and trespassed into an arena exclusively meant for taxation by the Union of India. The High Court also viewed it from another point of view, namely, who was liable as it was the consignment of goods which attracted the liability of purchase tax and in pristine essence was the "taxable event" under section 9(1)(b) of the Act. The High Court also analysed it from the point of view that, under section 9(1)(b), where a dealer purchases goods for the express purpose of manufacturing other goods within the State, then i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of these appeals. It is well-settled that what is the taxable event or what necessitates taxation in an appropriate statute, must be found out by construing the provisions. The essential task is to find out what is the taxable event. In what is considered to be an indirect tax, there is a marked distinction between the consequence of manufacture and the consequence of sale. It is well to remember that, in construing the expressions of the Constitution to judge whether the provisions like section 9(1)(b) of the Act are within the competence of the State Legislature, one must bear in mind that the Constitution is to be construed not in a narrow or pedantic sense. The Constitution is not to be construed as mere law but as the machinery by which laws are to be made. It was observed by Lord Wright in James v. Commonwealth of Australia and State of New South Wales [1936] AC 578 (PC) (at 614) that the rules which apply to the interpretation of other statutes, however, apply equally to the interpretation of a constitutional enactment. In this context, Lord Wright referred to the observations of the Australian High Court in Attorney-General for the State of New South Wales v. Brewery Em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence. If, on the other hand, it is the purchase of the goods that is the taxable event as held by the Full Bench of the High Court, then it will be within its competence. The Full Bench in Des Raj Pushap Kumar's case [1985] 58 STC 393 (P & H) has relied on the background of the facts and the circumstances which necessitated the introduction of the amendment. Mr. Tewatia, learned counsel appearing for the State, canvassed before us the historical perspective and stated that the Haryana State came into being as a result of the Punjab State Reorganisation Act, 1966 ; therefore, part of the legislative history of the taxing statute like any other statute is shared by the Haryana State with the Punjab State, and as such it is proper to notice the concept of purchase tax as it was evolved in the State of Punjab. Purchase tax was introduced in the State of Punjab for the first time by the East Punjab General Sales Tax (Amendment) Act, 1958. Section 2(ff) was introduced for the first time to define the expression "purchase". The definition of the term "dealer" was changed to include therein a purchaser of goods also. The definition of the term "taxable turnover" was also altered. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15", have to be judged for determining their validity in the true historical perspective as well as bearing in mind the remedial aspect of the provisions for the purpose for which these were enacted. Therefore, the main question is whether the tax envisaged by section 9(1) is a tax on purchase/sale of given goods or is a tax on the despatch/consignment of such goods and that depends on, as to whether the taxable event is a purchase/sale of goods or despatch/consignment of such goods. As mentioned hereinbefore, Mr. Tewatia laid a great deal of emphasis on the background of the provisions of section 9(1). He urged that the said section is both a taxing as well as a remedial provision, as would be evident from the scheme of the Act. The legislative policy was to see that all goods, except non-taxable goods, i.e., Schedule B goods, must yield tax/revenue to the State in the hands of a dealer, at one stage or the other, according to Mr. Tewatia. He analysed the scheme and referred us to section 6 along with section 27 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Mr. Aggarwal, that if at all the taxing event was spelt out, it was on the assumption that the goods in question were generally taxable and these were to put to tax under section 7A of the Tamil Nadu Act, if these came to be purchased without payment of tax and then sought to be dealt with in any manner as to escape payment of State sales/purchase tax within the State. Mr. Tewatia drew our attention to the observations of this court in Kandaswami's case [1975] 36 STC 191 to prove that the observations in Malabar Fruit Products Co. v. Sales Tax Officer [1972] 30 STC 537, where these questions were decided by Justice Poti of the Kerala High Court who spelt out that the taxing event was not the event of despatch but the event of purchase/sale of goods. It has, however, to be borne in mind that the questions involved in Malabar Fruit Products [1972] 30 STC 537 (Ker) and Kandaswami's [1975] 36 STC 191 (SC) cases were not concerned with the actual argument with which we are concerned in the instant matter. It is well-settled that a precedent is an authority only for what it actually decides and not for what may remotely or even logically follow from it. See Quinn v. Leathem [1901] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate also for, while replying to the question of double taxation, counsel for the State admitted that sales as well as purchase tax is imposable under the scheme of the Act which are of two sides. Hence, it was rightly urged by Mr. Rajaram Aggarwal that the first condition for attracting the applicability of section 9(1), "where a dealer is liable to pay tax under this Act purchases goods", is missing when sub-section (1) talks of a dealer liable to pay tax under the Act, obviously it is with reference to his purchasing activity and if on that activity, no purchase tax is payable, section 9(1) would not be applicable. To accept the submissions advanced by Mr. Tewatia, assumptions and presumptions are to be made. It is not permissible to do so in a fiscal provision. See in this connection the observations of this court in Commissioner of Sales Tax v. Modi Sugar Mills Ltd. [1961] 12 STC 182 (SC) ; [1961] 2 SCR 189 and Baidyanath Ayurved Bhawan (Pvt.) Ltd. v. Excise Commissioner [1971] 2 SCR 590 at 592. In that background, it must be noted that section 9 of the Act nowhere makes a reference to section 24 or any declaration furnished by the purchasing dealer on the basis of which he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and class of goods in relation to exigibility. In this connection, reference may be made to the observations of this court in Andhra Sugars .Ltd. v. State of 4P [1968] 21 STC 212 ; [1968] 1 SCR 705. On a clear analysis of the said section, it appears that section 9(1)(b) has to be Judged as and when liability accrues under that section. The liability to pay tax under this section does not accrue on purchasing the goods simpliciter, but only when these are despatched or consigned out of the State of Haryana. In all these cases, it is necessary to find out the true nature of the tax. Analysing the section, if one looks to the purchase tax under section 9, one gets the conclusion that the section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods, losing their original identity, and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created. It is the cumulative effect of that event which occasions or causes the tax to be imposed, to draw a fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was not identical but similar to section 9 of the Act. There at page 196 of the report, this court observed as follows : "Difficulty in interpretation has been experienced only with regard to that part of the sub-section which relates to ingredients (4) and (5). The High Court has taken the view that the expression 'goods, the sale or purchase of which is liable to tax under this Act', and the phrase 'purchases ... in circumstances in which no tax is payable under sections 3, 4 or 5' are 'contradiction in terms'." Ingredients Nos. 4 and 5 are as follows: "4. The goods purchased are 'goods, the sale or purchase of which is liable to tax under this Act'. 5. Such purchase is, 'in circumstances, in which no tax is payable under sections 3, 4 or 5, as the case may be';". The relevant ingredient involved, as mentioned at page 196, was as under : 6. The dealer either (a) consumer such goods in the manufacture of other goods for sale or otherwise, or (b) despatches all such goods in any manner other than by way of sale in the State, or (c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce." T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of inter-State trade or commerce." The mere consignment of goods by a manufacturer to his own branches outside the State does not in any way amount to a sale or disposal of the goods as such. The consignment or despatch of goods is neither a sale nor a purchase. The first judgment in the case of Goodyear India [1983] 53 STC 163 (P & H) was on December 4, 1982, when it was held that the notification was beyond the Act, as the word "disposal" did not include the word "mere despatch" as mentioned in the notification. The Constitution (Forty-sixth Amendment) Act 1982, came into force on February 2, 1983, whereby section 9 was amended. This amendment was after the Forty-sixth Constitution Amendment Act, 1982. The Forth-sixth Constitution Amendment Act, in the Statement of Objects and Reasons, inter alia, stated as follows : "There were reports from State Governments to whom revenues from sales tax have been assigned, as to the large scale avoidance of Central sales tax leviable on inter-State sales of goods through the device of consignment of goods from one State to another and as to the leakage of local sales tax in works contracts, hire-purchase transactions, lease of films, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it has sometimes been said, which must determine into what category it falls." We must, therefore, look not to the form but to the substance of the levy. See the observations of the Federal Court in Ralla Ram v. Province of East Punjab, AIR 1949 FC 81. Therefore, the nomenclature given by the Haryana Legislature is not decisive. One has to find out whether, in pith and substance, a consignment-tax is sought to be imposed as a tax on despatch in the course of inter-State trade or commerce. I have no hesitation in holding that it is a tax on despatch. Inter-State trade or commerce, it has been emphasised, is of great national importance and is vital to the federal structure of our country. As the imposition of consignment tax requires very deep consideration of all its aspects and a certain amount of consensus among the States concerned, especially with regard to the rates, grant of exemption, and ratio relating to distribution of proceeds amongst the States inter se the actual imposition of the tax is bound to take some time till an agreeable solution is found, but that would not make the consignment tax to be in suspended animation in the State, and make us hold that a tax whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o use the goods so purchased for the purposes specified therein, he shall be liable to pay tax, on the purchase value of such goods, at the rates notified under section 15, without prejudice to the provisions of section 50 Provided that the tax shall not be levied where tax is payable on such goods under any other provision of this Act." This provision, without making any change in the substantive provision, purports to give a direction to ignore the judgment or in other words, purports to overrule the judgments, namely, Goodyear India Ltd [1983] 53 STC 163 (P & H) and Bata India Ltd. [1983] 54 STC 226 (P & H), which is beyond the legislative competence of the State Legislature and this provision is void in view of the decision of this court. See Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136 at 140 ; [1969] 2 SCC 283 at 286. For the same reason, applying the main section instead of section 9(1), section 24 should also fail as amended. Civil Appeal No. 1515 of 1984 is also liable to be dismissed in view of the judgment of this court in Deputy Commissioner of Sales Tax (Law) v. Thomas, Stephen and Co. Ltd. [1988] 69 STC 320 ; [1988] 2 SCC 264, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 9 is, therefore, the charging section for taxation in cases where the goods are purchased for export. There is no other provision for levy of purchase or sales tax in such cases of export. Incidentally, "export" has been defined in section 2(e) of the Act which reads as follows " 2. (e) 'export' means the taking out of goods from the State to any, place outside it otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export out of territory of India;". No tax is payable under the Haryana Act when exports outside the State take place either in the course of inter-State sale or export out of the territory of India. No tax is, therefore, payable in regard to export outside India but the tax is payable for sale in the course of inter-State trade and commerce, i.e., under the Central Sales Tax Act. It is only when the goods are despatched/consigned to the depots of the FCI in other States that tax is levied under section 9 of the Haryana Act. This is in addition to the sales-tax paid by the FCI on the sale of grains in the recipient States. On a perusal of sections 14 and 15 of the Central Sales Tax Act, it becomes clear that wheat is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said goods. The question, therefore, that arises, is : whether the levy of additional tax at 2 per cent under section 13AA of the Act is a tax on purchases falling under entry 54 of List II of the Seventh Schedule or it is a tax on the despatch or consignment of the manufactured goods outside the State. In case of the latter, the State Legislature will have no power to impose any tax on such consignment or despatch of goods outside the State. If it is the former, then it will be valid. The question is, under a true construction of section 13AA of the Act, on what is the imposition of tax made, or in other words, what is the incidence of that taxation or taxable event ? In both these appeals, namely, Civil Appeals Nos. 4162 of 1988 and 4163 of 1988, the appellants, M/s. Wipro Products Ltd., and Hindustan Lever Ltd., are contending that the levy is bad. The issue involved in both the appeals is the constitutional validity and legality of the provisions of section 13AA of the Act, which was introduced into the Act by the Maharashtra Act 28 of 1982. The appellant had a factory at Amalnar in Jalgaon district in the State of Maharashtra wherein it uses non-essential oil purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concessional rate is paid, the obligation to pay the additional tax on the happening of certain events, namely, use of such goods in manufacture of finished goods, and despatch of finished goods outside the State is undertaken by the purchaser ; and (iii) implicit in the low rates of tax prescribed on raw material attributable to goods in Part I of Schedule C is the condition precedent that, to avail of this concession, the goods, in question are required to be sold in the State after being used in the manufacture of other taxable goods. The High Court, further, was of the opinion that a manufacturer who purchases raw material at a concessional rate on the strength of declaration in form 15 cannot transfer the goods manufactured out, of such raw material outside the State. The High Court held that if he does so, he is liable to pay purchase tax at the full rate on the raw material under section 14. According to the High Court, similarly, a manufacturer who purchases goods covered in Part III of Schedule C, and uses them in the manufacture of other taxable goods which he despatches outside the State, is liable to pay tax at rates ranging from 6 per cent. to 15 per cent Section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is not a registered dealer and uses such goods in the manufacture of taxable goods and despatches the goods, so manufactured, to his own place of business or to his agent's place of business situated outside the State within India, then such dealer shall be liable to pay, in addition to the sales tax paid or payable, or as the case may be, the purchase tax levied or leviable under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture, and accordingly the dealer shall include the purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter." The questions involved in these appeals are : whether section 13AA of the Bombay Act is beyond the legislative competence of the State Legislature and violative of article 14 of the Constitution ; and thirdly, whether the said provision is violative of article 301 of the Constitution. It was contended on behalf of the appellant that section 13AA of the Act is a charging section and imposes a charge of an additional rate of 2 per cent. in the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er stage of import or manufacture/production nor can the said power be exercised at the later stage of use or consumption but only at the stage of sale or purchase. In respect of sales tax, the right to levy duty would not at all come into being before the time of sale/purchase. Sales tax cannot be imposed unless the goods are actually sold and may not be leviable if there is a transfer in some other form. See in this connection the observations of the Federal Court in Mukunda Murari Chakravarti v. Pabitramoy Ghosh, AIR 1945 FC 1 at 22. Therefore, in this case, it is necessary to ascertain what is the taxable event under section 13AA of the Act which attracts duty. A taxing event is that event the occurrence of which immediately attracts the levy or the charge of tax. In fiscal legislations, normally a charge is created. The incidence of taxation occurs on the happening of the taxable event. Different taxes have different taxable events. In the instant case, Dr. Pal canvassed before us that the incidence of the levy of additional tax of two paise in the rupee is not on the purchase of goods but such a levy is attracted only when- (a) the goods which so purchased on payment of pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on the observations of this court in R. C. Jall Parsi v. Union of India [1962] Supp 3 SCR 436, where this court reiterated that, subject always to the legislative competence of the enacting authority, the tax can be levied at a convenient stage, so long as the character of the impost is not lost. The method of collection does, not affect the essence of the machinery of collection for administrative convenience. Reliance was also placed on the observations of Union of India v. Bombay Tyre International Ltd. [1984] 1 SCR 347 ; [1986] 59 Comp Cas 460. It was submitted by Mr. Dholakia that the correct approach is to first determine whether the State Legislature, having regard to entry 54 of List 11 of the Seventh Schedule to the Constitution, can levy tax on purchase of a class of goods, which class is to be identified by reference to the condition of use of such goods into other taxable goods and despatch of such taxable goods outside the State. He submitted that, if it is accepted that the State could have the power to tax purchases of goods meant for use in the manufacture of other taxable goods and despatch outside thereafter, then the next question is whether the State enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, those whose purchases of goods fell in Part I need not give such a declaration. According to him, from the standpoint of the object of encouraging resale within the State, the classification in the form of Parts I and II had no rational nexus. Therefore, that construction should be made which may make section 13AA of the Act avoid this mischief. According to Mr. Dholakia, section 13AA speaks of the requirement of additional purchase tax from those who have paid purchase tax, if the object of the purchases is to use the goods falling in Part I of Schedule C for manufacture of taxable goods and the despatch of such goods outside the State. He alleged it to be a fair and reasonable construction and it will subserve the purpose of the amendment. It is well-settled that a reasonable construction should be followed and a literal construction may be avoided if that defeats the manifest objects and purposes of the Act. See CWT v. Kripashankar Dayashanker Worah [1971] 81 ITR 763 (SC) at 768, and Income-tax Commissioners for City of London v. Gibbs[1942] 10 ITR (Suppl) 121 (HL) at 132 Mr. Dholakia further submitted that the Statement of Objects and Reasons also helps this construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t products from the goods on the purchase of which purchase tax was paid. The Maharashtra legislation has to be viewed in the context of the Forty-sixth Amendment to the Constitution. The Forty-sixth Amendment introduced article 269(1)(h) which lays down that the proceeds of the tax on 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, will be assigned to the States. The said amendment also introduced entry No. 92B in List I of the Seventh Schedule. The said amendment was made on the consideration of the 61st Report of the Law Commission. Entry 92B in List I of the Seventh Schedule and article 269(1)(h) of the Constitution bring within its sweep the consignment of goods by a person either to himself or to any other person in the course of inter-State trade or commerce. Article 269(3) gives power to Parliament to formulate the principles for determining when a consignment of goods takes place in the course of inter-State trade or commerce. If entry 92B of List I is to be given the widest interpretation, as it should be, it would be clear that as a result o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of article 301 of the Constitution. Reference was made to the decision of this Court in Atiabari Tea Co. Ltd. v. State of Assam[1961] 1 SCR 809, Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491, Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 ; [1968] 1 SCR 705, State of Madras v. Nataraja Mudaliar (N. K. ) [1968] 22 STC 376; [1968] 3 SCR 829 and State of Kerala v. A. B. Abdul Kadir [1970] 1 SCR 700. One has to determine : does the impugned provision amount to restriction directly and immediately on the trade or commerce movement. As was observed by this court in Kalyani Stores V. State of Orissa [1966] 1 SCR 865, imposition of a duty or tax in every case was not tantamount perse to any infringement of article 301 of the Constitution. Only such restrictions or impediments which directly or immediately impede free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301. A tax in certain cases may directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and its own setting of time and circumstances. Unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein, are hereby set aside. In the facts and the circumstances of this case, the parties will pay and bear the respective costs. So far as Civil Appeals Nos. 1633 of 1985 and 3033 of 1986 are concerned, wherein the appellants are the Food Corporation of India, I allow these appeals and set aside the judgment of the High Court on the ground that tax on despatch or consignment was not within the competence of the State Legislature. I am, however, not dealing with or expressing any opinion on the other contentions of the Food Corporation of India that, in view of the nature of its business, it was not liable to tax in respect of the sales tax. This contention will be decided in appropriate proceedings. So far as the contention regarding penalty under the Haryana Act, is concerned, these proceedings fail because the charging provisions fail. In so far as the penalty Proceedings are impugned on other grounds apart from the failure of the charging provisions, I am expressing no opinion on those aspects. RANGANATHAN J. - I agree but wish to add a few words. The question raised in these appeals is a fairly ticklish one. Simply stated, section 9 of the Haryana General Sales Tax Act, 1973 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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