1970 (4) TMI 124 - SC - VAT and Sales Tax

Whether medicinal or toilet preparations containing alcohol were exempt from the payment of tax under the East Punjab General Sales Tax Act? Held that - Appeal dismissed. The High Court was right in saying that there was nothing in section 8 to indicate that the words former enactment meant only a Central enactment and not a State enactment and that the courts would not be justified to read in that section words which were not there and to place a narrow and limited construction on the words former enactment . It has not been disputed on behalf of the appellant that if section 8 is applicable the respondent would be exempt from payment of tax under the Act on the alcoholic preparations on which excise duty is being levied under the provisions of the Central Act.

Summary

Issues:
1. Whether medicinal or toilet preparations containing alcohol are exempt from tax under the East Punjab General Sales Tax Act.
2. Interpretation of section 8 of the General Clauses Act, 1897 regarding the exemption under Schedule B to the Act.

Analysis:
The case involved an appeal challenging the levy of sales tax on alcoholic preparations under the East Punjab General Sales Tax Act. The respondent, running a factory manufacturing spirituous and medicinal preparations containing alcohol, claimed exemption from tax. The Punjab High Court had held in favor of the respondent, stating that such preparations were exempt from tax under the Act. The appellant-State contended that the respondent could no longer claim the exemption due to changes in legislation. The Central Act repealed corresponding state laws, bringing uniformity in excise duty on alcoholic preparations. The State continued to collect the excise duty, which went to the State Exchequer. The respondent was assessed for sales tax on alcoholic preparations, leading to a legal challenge under Article 226 of the Constitution. The Single Judge and Division Bench ruled in favor of the respondent, interpreting section 8 of the General Clauses Act, 1897.

The key issue was the interpretation of section 8 of the General Clauses Act, 1897. Section 8(1) provides for references to repealed provisions in subsequent enactments. The argument centered on whether the term "former enactment" in section 8 encompassed both Central and State Acts. The State contended that it only referred to Central Acts, excluding State legislation. However, the court rejected this interpretation, emphasizing that "enactment" included Acts from both Union Parliament and State Legislature. The court reasoned that section 8 applied to situations where a Union Parliament Act repealed a State Act, ensuring continuity in legal references. Thus, the court upheld the High Court's interpretation, affirming that the respondent was exempt from tax under the Act on alcoholic preparations subject to excise duty under the Central Act.

In conclusion, the Supreme Court dismissed the appeal, affirming the exemption of the respondent from paying tax under the East Punjab General Sales Tax Act on alcoholic preparations subject to excise duty under the Central Act. The court's decision hinged on the correct interpretation of section 8 of the General Clauses Act, 1897, which encompassed both Central and State enactments, ensuring continuity in legal references despite legislative changes.