1958 (4) TMI 57 - SC - VAT and Sales Tax

Whether sales of coarse and medium cloth are liable to be taxed under the principal Act as amended by Hyderabad Act XXVII of 1952 (the amended Act being hereafter referred to as the principal Act) in view of Article 286(3) of the Constitution and certain other enactments to which reference will be presently made, declaring these varieties of cloth to be essential goods? Held that - A transfer of goods which under the explanation is not to be regarded as a sale within the meaning of the Act is a transfer of goods which cannot be taxed under an Act of a State Legislature passed after the Parliamentary Act declaring these goods to be essential for the life of the community. The Parliamentary Act declaring goods to be essential on which learned Advocate for the appellants relied for his present argument was Act LII of 1952. But after this Act, no Act was passed by the Hyderabad Legislature purporting to tax any sales of goods declared essential by Act LII of 1952. Therefore, it cannot be said that the transfers of coarse and medium cloth are not sales within the meaning of the principal Act. Appeal dismissed.

Summary

Issues:
Interpretation of Hyderabad General Sales Tax Act, 1950 in relation to sales of coarse and medium cloth. Application of Article 286(3) of the Constitution and Explanation (2) of section 2(k) of the Act. Validity of Hyderabad Act XXVII of 1952 and Act LII of 1952 in relation to taxation of essential goods.

Analysis:
The judgment by Sarkar, J., along with other judges, addresses the issue of taxation under the Hyderabad General Sales Tax Act, 1950, specifically focusing on the sales of coarse and medium cloth. The Act was amended by Hyderabad Act XXVII of 1952, making sales of these types of cloth taxable. The appellants challenged this taxation, citing Article 286(3) of the Constitution and Explanation (2) of section 2(k) of the Act. They argued that these goods were essential and not liable to be taxed. The court examined various enactments, including the Essential Supplies (Temporary Powers) Act, XXIV of 1946, and Act LII of 1952, which declared coarse and medium cotton cloth as essential goods. The court concluded that the amendments to the principal Act were valid and effective in imposing taxes on these goods, as they were passed before Act LII of 1952. The court also dismissed the contention based on Explanation (2) of section 2(k), stating that it did not exempt essential goods from taxation under the Act.

The judgment further discussed the legislative competency and validity of Hyderabad Act XXVII of 1952 in light of Act LII of 1952. The court rejected the argument that the former was enacted to circumvent the latter, emphasizing that the validity of an act depends on legislative competency. The court clarified that the explanation in section 2(k) did not exempt essential goods from taxation, as it only applied to goods not taxed under a State Legislature law passed after a Parliamentary declaration. As no such law was passed by the Hyderabad Legislature post Act LII of 1952, the transfers of coarse and medium cloth were not exempt from taxation under the principal Act.

In a separate judgment by Bose, J., he expressed a dissenting opinion, indicating that he would have allowed the appeals based on reasons provided in a previous judgment. However, the majority opinion prevailed, leading to the dismissal of the appeals with costs. The court's decision was based on the interpretation of relevant constitutional provisions and legislative enactments, affirming the validity of the amendments to the principal Act and the taxation of coarse and medium cloth.