1971 (11) TMI 176 - SC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the notification No. 3483-E & T-54/723(CH) dated August 5, 1954.
2. Conflict of assessment orders with the decision of the Supreme Court in Bhawani Cotton Mills Ltd. [1967] 3 SCR 577.

Issue-wise Detailed Analysis:

1. Validity of the Notification No. 3483-E & T-54/723(CH) dated August 5, 1954:

The primary issue in these appeals was the validity of the notification issued by the State Government on August 5, 1954, which amended entry 57 in Schedule B of the Punjab General Sales Tax Act, 1948. Originally, edible oils produced from sarson, toria, and til were exempt from sales tax. However, the notification substituted this entry to exempt only those edible oils produced by indigenous kohlus worked by animal or human agency and sold by the owners of such kohlus.

The High Court, in the case of Ganga Ram Suraj Parkash [1963] 14 S.T.C. 476, had held that this notification was invalid. The court relied on the provisions of the Act as it originally stood, the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952, and the unamended Article 286(3) of the Constitution to conclude that the notification was invalid.

However, the Supreme Court, in the connected case of Sansari Mal Puran Chand, had upheld the validity of the notification from September 11, 1956, following the Constitution (Sixth Amendment) Act. The Court held that the Act and the notification effectively imposed tax on sales of edible oils from September 11, 1956, and not before. Consequently, the Supreme Court in the present case also held that the view of the High Court, which declared the notification invalid, could not be sustained. The Court concluded that the notification was valid from September 11, 1956, and the assessees were liable to pay tax on all sales of edible oils effected after that date.

2. Conflict of Assessment Orders with the Decision of the Supreme Court in Bhawani Cotton Mills Ltd. [1967] 3 SCR 577:

The second issue was whether the assessment orders were in conflict with the Supreme Court's decision in Bhawani Cotton Mills Ltd. The assessees had amended their writ petitions to challenge the levy of purchase tax on oil-seeds under the Act, as it stood on April 1, 1960, arguing that such levy was opposed to the provisions of the Central Sales Tax Act, 1956.

The Supreme Court in Bhawani Cotton Mills Ltd. had held that the levy of sales tax under the Act, as it stood on April 1, 1960, in respect of declared goods, was illegal and invalid. The High Court had allowed the amendment applications but did not consider this fresh aspect in its judgment. The Supreme Court acknowledged that this contention of the assessees had to be accepted in light of the Bhawani Cotton Mills Ltd. decision. However, it was not clear from the assessment orders or the record whether and at what stage the purchase tax had been levied in respect of oil-seeds.

The State had referred to the Punjab General Sales Tax (Amendment and Validation) Act, 1967, which replaced Ordinances Nos. 1 and 12 of 1967 issued in view of the Bhawani Cotton Mills Ltd. decision. This Amendment Act introduced Section 11AA, which required the assessing authority to reconsider the orders of assessment regarding declared goods and pass fresh orders in accordance with the amended provisions of the Act.

The Supreme Court directed the assessing authority to exercise its jurisdiction under Section 11AA of the Act, as amended, and revise the orders of assessment to conform with the amended Act. If any assessment had not been completed, the fresh order of assessment would have to be made in accordance with the principles laid down by the Court in the connected appeals of State of Punjab and Ors. v. Shakti Cotton Co. [1972] 29 S.T.C. 706.

Conclusion:

The appeals were allowed in part. The judgments and orders of the High Court were modified to declare that the impugned notification was valid and effective from September 11, 1956, allowing the levy of sales tax on edible oils after that date. The appeals were dismissed concerning other aspects, subject to the directions given to the assessing authority to revise the orders of assessment in accordance with the amended Act. Each party was directed to bear its own costs in all these appeals.