1967 (4) TMI 110 - SC - VAT and Sales Tax

Whether the stage of levy is definite and ascertainable and there is no possibility of the tax being levied at more than one stage? Held that - Appeal allowed. The High Court has sustained the levy of tax under the original notification of 1958, on the basis of section 22 of the Punjab General Clauses Act, which, in our opinion, does not assist the State. It is not open to the State to urge that it is entitled, in the matter of levying tax on transactions by way of purchase, to tax only the category of purchases for use in the manufacture of goods for sale. Further, the State has not been able to satisfy us that there is any reasonable classification made, which will enable this Court to sustain the notification. Inasmuch as no fresh notification had been issued, under section 5(1), till September 26, 1961, the assessment for the years 1960-61 and 1961-62, on the basis of the notification issued in 1958, cannot be sustained, on this additional ground also.

Issues Involved:
1. Validity of the second proviso to section 5(1) and sub-clause (vi) of section 5(2)(a) of the Punjab General Sales Tax Act, 1948.
2. Effect of the notification under section 5 of the Punjab General Sales Tax Act, 1948, issued on September 26, 1961.
3. Liability of commission agents versus principals for purchase tax.
4. Exemption of oil-cakes from sales tax.
5. Imposition of tax on the sale of edible oils.
6. Validity of assessments made prior to the notification issued on September 26, 1961.

Detailed Analysis:

1. Validity of the Second Proviso to Section 5(1) and Sub-clause (vi) of Section 5(2)(a) of the Punjab General Sales Tax Act, 1948:
The primary contention was whether these provisions were consistent with section 15(a) of the Central Sales Tax Act, 1956, which mandates that tax on declared goods should not exceed the specified rate and should not be levied at more than one stage. The court noted that the Punjab Act did not clearly specify the stage at which the tax should be levied, leading to potential multiple taxations, which is contrary to the Central Act. The court concluded that the provisions of the Punjab Act were not in conformity with section 15(a) of the Central Act, leading to the possibility of tax being levied at more than one stage, thus invalidating the provisions in question.

2. Effect of the Notification under Section 5 of the Punjab General Sales Tax Act, 1948, Issued on September 26, 1961:
The notification issued on September 26, 1961, specified the rate of tax on Schedule C goods. The court held that assessments for periods before the issuance of this notification could not be sustained because the definition of "purchase" was amended in 1960, and no corresponding notification was issued until 1961. The court ruled that the notification of 1958 could not be applied post-amendment, and thus, assessments prior to the 1961 notification were invalid.

3. Liability of Commission Agents versus Principals for Purchase Tax:
The court emphasized the need for a proper inquiry to determine whether the commission agents or the principals were liable for the purchase tax. It was necessary to investigate the terms of the contracts and the course of dealings between the parties to ascertain liability. The court directed the Assessing Authority to reassess the liability after providing an opportunity for evidence production.

4. Exemption of Oil-Cakes from Sales Tax:
The petitioners argued that oil-cakes should be exempt from sales tax under the entry "fodder of every type (dry or green)." The court, however, held that in ordinary parlance, "fodder" did not include "oil-cakes." The court relied on the principle that words in a taxing statute should be construed in their popular sense, meaning as understood by people conversant with the subject matter. The court thus rejected the claim for exemption of oil-cakes from sales tax.

5. Imposition of Tax on the Sale of Edible Oils:
The court noted that the exemption for edible oils produced in tel ghanis driven by mechanical power was withdrawn by a notification dated March 8, 1965. However, the court held that any tax imposed on such oils prior to this notification was illegal and invalid. The court directed that the assessments made for the sale of edible oils prior to March 8, 1965, be set aside and reassessed if necessary.

6. Validity of Assessments Made Prior to the Notification Issued on September 26, 1961:
The court held that the assessments made prior to the issuance of the notification on September 26, 1961, could not be sustained. The court emphasized that the notification issued in 1958 could not be applied after the definition of "purchase" was amended in 1960. Hence, any assessments made before the 1961 notification were declared invalid.

Conclusion:
The Supreme Court allowed the appeals, invalidating the assessments made under the provisions of the Punjab General Sales Tax Act, 1948, that were found to be inconsistent with the Central Sales Tax Act, 1956. The court directed the Assessing Authority to reassess the cases in light of the judgment, ensuring compliance with the Central Act and proper determination of tax liability. The court also emphasized the need for clear and precise legislation to avoid multiple taxations and ensure compliance with statutory provisions.

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