1967 (8) TMI 101 - SC - VAT and Sales Tax

Whether Notification No. 3483-E & T-54/723(CH), dated the 5th August, 1954, whereby exemption from sales tax granted by the Government in respect of edible oils was abolished in the case of such edible oils produced in ghanis run by mechanical process was intra vires and not a law made by the Legislature of the State which requires the previous assent of the President of India? Held that - Appeal partly allowed. The respondents are not liable to pay tax on sales of edible oil produced in ghanis run by mechanical power effected by them before September 11, 1956. But they are liable to pay tax on such sales made after September 11, 1956.

Issues Involved:
1. Validity of Section 5 of the East Punjab General Sales Tax Act, 1948.
2. Impact of the invalidity of Section 5 on other provisions of the Act.
3. Validity of the amended Section 5 by East Punjab Act No. 19 of 1952.
4. Interpretation of Article 286(3) of the Constitution regarding the amended Section 5.
5. Effect of the amendment of Article 286(3) and the repeal of Central Act No. 52 of 1952.
6. Validity of the notification dated August 5, 1954, under Section 6(2).
7. Validity of notifications issued under Section 5 before the passing of East Punjab Act No. 19 of 1952.
8. Effective imposition of tax on sales of edible oil during the relevant assessment years.

Detailed Analysis:

1. Validity of Section 5 of the East Punjab General Sales Tax Act, 1948
The Supreme Court held that Section 5 of the East Punjab Act No. 46 of 1948, as originally passed in 1948, was void due to excessive delegation of legislative power to the State Government. This conclusion aligns with the decision in M/s. Devi Dass Gopal Krishnan and Others v. State of Punjab and Others.

2. Impact of the Invalidity of Section 5 on Other Provisions of the Act
The invalidity of Section 5 did not render Sections 4 and 6 and other sections of the Act invalid. However, until an appropriate Section 5 was inserted, Section 4 remained unenforceable.

3. Validity of the Amended Section 5 by East Punjab Act No. 19 of 1952
The amended Section 5, inserted by the East Punjab Act No. 19 of 1952, was held valid. It was not invalid due to excessive delegation of legislative authority, nor was it invalid on the ground that Act 19 of 1952 purported to amend a still-born section. The Court viewed that Act No. 19 of 1952 effectively inserted a new Section 5 into Act No. 46 of 1948 with retrospective effect.

4. Interpretation of Article 286(3) of the Constitution Regarding the Amended Section 5
The Court determined that the amended Section 5, which authorized the fixation of the rate of tax on the taxable turnover, was a law authorizing the imposition of a tax within the meaning of Article 286(3) of the Constitution as it stood before the Constitution (Sixth Amendment) Act. Since the East Punjab Act No. 19 of 1952 did not receive the President's assent, it could not take effect in respect of sales and purchases of essential goods during the currency of the unamended Article 286(3).

5. Effect of the Amendment of Article 286(3) and the Repeal of Central Act No. 52 of 1952
The amendment of Article 286(3) by the Constitution (Sixth Amendment) Act lifted the restriction on the operation of the amended Section 5 inserted by the East Punjab Act No. 19 of 1952 in respect of essential goods. Consequently, the section took effect on such goods from September 11, 1956. The repeal of Central Act No. 52 of 1952 by Central Act No. 74 of 1956 did not affect this conclusion.

6. Validity of the Notification Dated August 5, 1954, Under Section 6(2)
The notification dated August 5, 1954, issued under Section 6(2), was valid. The Court clarified that the notification was not a "law made by the Legislature of a State" within the meaning of Article 286(3). Therefore, it did not require the President's assent to affect essential goods.

7. Validity of Notifications Issued Under Section 5 Before the Passing of East Punjab Act No. 19 of 1952
Notifications issued under Section 5 before the passing of the East Punjab Act No. 19 of 1952 were invalid initially due to the invalidity of the original Section 5. However, the retrospective effect of the amended Section 5 validated these notifications, making them effective from the commencement of the main Act.

8. Effective Imposition of Tax on Sales of Edible Oil During the Relevant Assessment Years
Tax on sales of edible oil produced in ghanis run by mechanical power was effectively imposed from September 11, 1956, and not before. Therefore, the respondents were not liable to pay tax on sales made before September 11, 1956, but were liable for sales made after this date.

Conclusion:
1. The unamended Section 5 of the East Punjab Act No. 46 of 1948 was void.
2. The invalidity of Section 5 did not render Sections 4 and 6 and other sections of the Act invalid.
3. The amended Section 5 inserted by the East Punjab Act No. 19 of 1952 is valid.
4. The amended Section 5 was a law authorizing the imposition of a tax within the meaning of Article 286(3) of the Constitution as it stood before the Constitution (Sixth Amendment) Act.
5. The amended Section 5 and the notifications issued under it did not take effect before September 11, 1956, in respect of sales or purchases of goods declared essential to the life of the community by Central Act No. 52 of 1952, but they took effect in respect of such sales or purchases after September 11, 1956.
6. The notification dated August 5, 1954, issued under Section 6(2) is valid.
7. The notifications issued under Section 5 before the passing of the East Punjab Act No. 19 of 1952 are valid.
8. Tax was effectively imposed on the sales or purchases of edible oil from September 11, 1956, and not before.

The respondents are not liable to pay tax on sales of edible oil produced in ghanis run by mechanical power effected before September 11, 1956, but are liable for sales made after this date. The appeals are partly allowed, and C.M.Ps. Nos. 877 to 879 of 1964 are dismissed. There will be no order as to costs.

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