TMI Blog1988 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Kerala legislature. Thus the High Court was right in the view it took viz. that the scope of the exemption available under Item 7 of the Third Schedule to the 1963 Act will vary according to the scope of the corresponding entry in the Schedule to the 1944 Act as it stands at the relevant time. So far as assessment years 1971-72 and 1972-73 are concerned, the definition of 'cotton fabrics' in Item 19 of the Schedule to the 1944 Act, as amended by the Finance Act, 1969 w.e.f. 1-4-1969, will apply. Appeal dismissed. - Civil Appeal No. 207-208 (NT) of 1979 - - - Dated:- 27-10-1988 - Sabyasachi Mukharji and S. Ranganathan, JJ. T.S. Krishnamoorty Iyer, Senior Advocate (S.B. Sawhney and V.B. Saharya, Advocates, with him), for the respondent. P.S. Poti, Senior Advocate (K.R. Nambiar, Advocate, with him), for the appellant. [Judgment per : S. Ranganathan, J.]. - A very interesting question as to the principles of interpretation of legislation by incorporation or reference arises for consideration in these appeals arising out of certain assessments to sales tax in Kerala. Section 9 of the Kerala General Sales Tax Act, 1963 which came into force on 1-4-1963 granted e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original one. (ii) In 1957, there were certain legislations of Parliament affecting the levy of sales tax and excise duty. The first of these was the Central Sales Tax Act, 1956 (C.S.T. Act) passed in pursuance of Article 286 (3) of the Constitution of India which reads thus: "Any law of a State shall, in so far as it imposes or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-state trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." The C.S.T. Act received the assent of the President on 24-12-1956. S. 14 of the Act declared certain goods to be goods of special importance in Inter-state trade or commerce, (hereinafter referred to as 'declared goods'). These included, as on 1-4-1963, the following: "(ii-a) cotton fabrics, as defined in Item No. 19, of the First Schedule to the Central Excises and Salt Act, 1944; xxx xxx xxx (vii) rayon or artificial silk fabrics, as defined in Item No. 22 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944); (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y) of the First Schedule to the 1944 Act. It may be mentioned here that the Finance Act, 1961 had amended S. 14 of the C.S.T. Act by including, as Item (xi): "silk fabrics as defined in Item 20 of the First Schedule of the 1944 Act". It also simultaneously amended the 1957 Act by adding a reference to 'silk fabrics' in S. 3(1), in the definition Clause S. 2(c) as well as in the Schedule. However, in 1968, when the Central Sales Tax Act was amended again by deleting the reference to 'silk fabrics', there was no corresponding amendment in the 1957 Act. The Finance (No. 2) Act, 1977, substituted the word "man-made fabrics" for the words "rayon or artificial silk fabrics" w.e.f. 8-8-1977 and included a definition of the new expression in Item 22 of the Schedule to the 1944 Act and the 1957 Act. S. 7 of the Act, as originally enacted, declared that the goods declared to be of special importance would, from 1-4-1968, be subject to the restrictions and conditions specified in S. 15 of the Central Sales Tax Act. This section was omitted, w.e.f. 1-10-1958, by Act 31 of 1958 which also amended S. 15 of the Central Sales Tax Act. (iv) The levy of sales tax in Kerala was formerly governed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional duty of excise in respect of various goods specified in the Schedule to the Act over and above the duty chargeable on them under the 1944 Act. These goods included "cotton fabrics" "silk fabrics", "woollen fabrics", "man-made fabrics" and "wool tops" as defined in Items 19, 20,21, 22 and 43 of the First Schedule to the 1944 Act. 3. These are the relevant statutory provisions. On these the question to be considered is : What is the effect of the mention of the definition of "cotton fabrics" given in the 1944 Act in the Schedule to the 1963 Act ? Does it attract only the said definition as on 1-4-1963 or also the subsequently amendments thereto? To appreciate the contentions urged, it is necessary to make a brief reference to the principles of interpretation of an enactment which, for purposes of convenience, refers to or incorporates a provision of another. These have been discussed in various earlier decisions viz. Secretary of State v. Hindustan Cooperative Insurance Society Ltd. (1931 -58I. A. 259), Collector of Customs v. Nathella Sampathu Chetty Another (1962-3 S.C.R. 786), Ram Sarup v. State (1963-3 S.C.R. 858), Ram Kirpal v. State (1970-3 S.C.R. 233), New Central Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 9 read with Item No. 7 of the Schedule III of the General Sales Tax Act, 1963. If the definition was merely by way of 'reference or citation', the referred or cited provision grows and shrinks with the changes in the parent statute. Even in the case of an incorporated definition while the general principle is that the incorporated definition remains static and is unaffected by the developments or fluctuations of the parental source from which it was incorporated, two of the well-recognised exceptions formulated by the Supreme Court in Stete of M.P. v. M.V. Narasimhan (AIR 1975 S.C. 1835) seem to apply here, that is, exceptions (a) and (c), xxx. The concept of 'cotton fabrics' in the Central Excises and Salt Act seems to be integrally linked with the provisions of the General Sales Tax Act and we do not think that we would be justified in regarding the latter Act as unaffected by the growing concept of the term 'cotton fabrics' in the Central Excises and Salt Act. We feel too, that unless the extended definition of the Central Excises and Salt Act is imported into the Sales Tax Act, the latter Act would become unworkable and ineffectual." 4. Shri Potti, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 and again after 1 -9-1967 they are liable to both sales tax and additional excise duty. It is thus not possible to view the two levies as supplementary to, or inter-dependent on, each other. (c) The 1963 Act only incorporates a definition contained in the 1944 Act. The 1957 Act is an independent Act, applicable to some of the goods to which the 1944 Act are applicable. It has its own schedule, the descriptions in which need not be - though they generally are - identical with those in the Schedule to the 1944 Act. The 1944 and 1957 Acts may be somewhat inter-linked but there is no justification to import that connection also for the purposes of the 1963 Act. (d) The objects and reasons of the 1957 Act explicitly state that the levy of additional excise duty on goods thereunder does not preclude the State legislatures from levying any sales tax on only, such levy will be subject to the restrictions contained in the CST Act. (e) It should not also be overlooked that the 1963 Act is an enactment of a State legislature. To construe Entry 7 in its Schedule as authorising the applicability, not merely of the then current definition of the 1944 Act but its future amendments as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to. 6. Article 286 of the Constitution of India imposed certain restrictions on the legislative powers of the States in the matter of levy of sales tax on sales taking place outside the State, sales in the course of import or export, sales in the course of inter-state trade or commerce and sales of declared goods. The Sales Tax Acts in force in several States were not in conformity with the provisions of the Constitution and attempts to bring those laws to be in conformity with these provisions gave rise to a lot of litigation. This led to an amendment of Article 286. Clause (2) of the article, as it stands, since 11th September, 1956, authorised Parliament to formulate principles for determining when sale or purchase of goods can be said to take place in the course of import or export or in the course of inter-state trade or commerce. Clause (3) was amended, in terms already set out, to restrict the powers of a State to impose sales or purchase tax on declared goods. The C.S.T. Act, 1956 which came into force on 5-1-1957 formulated the principles referred to in Article 286(2). As already mentioned, this Act was amended, inter alia, by Act 16 of 1957 w.e.f. 6-6-1957 and by Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rayon or artificial fabrics and woollen fabrics were categorised as declared goods and subjected to additional excise duty. When the numerical order of these items in the 1944 Act (originally 8.9, 12, 12A, 12B) came to be changed in 1960 (as 1.4, 19, 22, 21) a corresponding change was effected in the 1957 Act. 'Silk fabrics' as defined in item 20 of the 1944 Act was included in 1961 in the CST Act and the 1957 Act. The fact that 'cotton fabrics' though listed as Item 12 in the Schedule to the 1944 Act was not brought into the list in S. 14 till 1-10-1958 or that "silk fabrics" was dropped from the list in S. 14 w.e.f. 11-6-1968 though it ontinues In the Schedule to the 1944 Act does not alter the position that these three acts are inter-connected and that certain goods taken out from the Schedule to the 1944 Act were to be subjected to the special treatment outlined in the CST Act and the 1957 Act. 7. This may be so, says Sri Potti, but there is no justification to bring the 1963 Act into this group. This short point is that the State legislature is completely free within its domain. Its power to levy sales tax includes a power to levy a tax on sales of declared goods as well. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depending upon its own financial exigencies. But these factual or periodical variations do not detract from the basic reality that the policy of sales tax levy on declared goods has to keep in view, and be influenced by, the provisions of the CST Act and the 1957 Act. The reference to the 1944 Act definitions for purposes of grant of exemption in the 1963 Act as enacted originally as well as when the latter was amended in 1967 and the specific reference to the 1957 Act when the First Schedule to the 1963 Act was amended in 1980 are quite significant in this context. We, therefore, think that, though the 1963 Act referred only to the definitions in the 1944 Act, the entries in the Schedule have to be juxtaposed into the broad pattern or scheme evolved by the 1956-57 enactments (set out earlier in the judgment. Doing so, and even assuming that the reference in the items of the Schedule to the definitions in the 1944 Act is by way of incorporation and not reference, one cannot escape the conclusion that the circumstances are covered by the exceptions outlined in Narasimhan (1976 -1 SCR 6). They certainly fall within the scope of exception (a) mentioned therein and also fall within ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to that particular matter." This conclusion has been explained and distinguished in the Gawalior Rayon case (1974 - 2 SCR 879) in which Khannal, J and Mathew, J. delivered separate but concurring judgments. Khanna J. said : "It would appear from the above that the reason which prevailed with the majority in striking down the Pondicherry Act was the total surrender in the matter of sales tax legislation by the Pondicherry Legislature in favour of the Madras Legislature. No such surrender is involved in the present case because of the Parliament having adopted in one particular respect the rate of local sales tax for the purpose of central sales tax. Indeed, as mentioned earlier, the adoption of the local sales tax is in pursuance of a legislative policy induced by the desire to prevent evasion of the payment of central sales tax by discouraging inter-state sales to unregistered dealers. No such policy could be discerned in the Pondicherry Act which was struck down by this Court. Another distinction, though not very material, is that in the Pondicherry case the provisions of the Madras Act along with the subsequent amendments were made applicable to an area which was within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1969 w.e.f. 1-4-1969, will apply. 12. Shri Krishnamurthy Iyer for the assessees contended that it is possible to spell out, from certain passages in the judgment of the High Court where judicial decisions are discussed, an inference that the High Court was inclined to the view that PVC Cloth would be covered even by the previous demended definition in the 1944 Act. He also attempted to support this view by citing certain cases. Sri Potti contested the correctness of both these arguments. In the view we have taken on the main issue, we consider it unnecessary to go into this question. In any event, the High Court has returned no specific answer to this issue which was clearly an aspect of the questions posed for its consideration by the Tribunal (at page 42 of the paper book) and, even if we had accepted the contention of Sri Potti that only the definition as on 1-4-1964 would apply, we would have perhaps only left it to the High Court to consider this aspect of the matter afresh. 13. Shri Krishnamurthy Iyer also submitted that the certificate of fitness of appeal granted by the High Court (page 115 of the paper book) is defective inasmuch as it does not specify the substa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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