1961 (7) TMI 47 - SC - VAT and Sales Tax

Whether the notification issued by respondent 1 on October 24, 1953, was valid, and item 27 in the list notified brought the articles in question within the mischief of the Sales Tax Act and so the petitioners were not entitled to any writ as claimed by them? Held that - Appeal dismissed. The first condition is that the impugned law must be one which is made by the Legislature of a State which obviously means a State which came into existence under and after the Constitution; and that shows that the impugned law must be a law made by the Legislature of a State subsequent to the Constitution. This condition is satisfied in the present case because the impugned notification has been issued by virtue of the authority delegated to respondent 1 by Act 30 of 1950 and this Act was passed after the Constitution was adopted. The declaration made by the Act was intended to be prospective in operation and it would affect laws made after the commencement of the Act, and that clearly must mean that if a law had been passed prior to the com- mencement of the Act, and it authorised the imposition of a tax on the sale or purchase of certain commodities its validity cannot be challenged on the ground that the said commodities have been subsequently declared by the Act to be essential for the life of the community. The impugned notification with which we are concerned and the Act under which it has been issued are thus outside the purview of section 3 of the Act

Summary

Issues Involved:
1. Interpretation of the term "iron and steel" under Section 2 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act.
2. Validity of the notification issued by the State of Madhya Bharat under Article 286(3) of the Constitution.
3. Whether the impugned notification contravenes Article 286(3) of the Constitution.

Issue-wise Detailed Analysis:

1. Interpretation of the term "iron and steel" under Section 2 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act:
The appellant argued that the term "iron and steel" in Section 2 of the Act should be interpreted broadly to include all articles made exclusively from iron and steel, in which the identity of iron and steel has not been lost. This interpretation was based on the commercial sense of the terms and the legislative history, which indicated a broad and wide construction. The appellant referred to various legislative provisions, such as the Iron and Steel (Control of Production and Distribution) Order, 1941, and the Essential Commodities Act, 1955, to support this argument. However, the High Court rejected this broad interpretation, concluding that the term "iron and steel" did not include articles made from these materials.

2. Validity of the notification issued by the State of Madhya Bharat under Article 286(3) of the Constitution:
The appellant contended that the notification issued by the State of Madhya Bharat on October 24, 1953, was invalid as it contravened Article 286(3) of the Constitution. Article 286(3) stipulates that no State law imposing a tax on the sale or purchase of goods declared by Parliament to be essential for the life of the community shall have effect unless it has been reserved for the President's consideration and received his assent. The appellant argued that since "iron and steel" were declared essential under Section 2 of the Act, the notification should be invalidated for not complying with Article 286(3).

3. Whether the impugned notification contravenes Article 286(3) of the Constitution:
The Court analyzed whether the impugned notification contravened Article 286(3). It was noted that Article 286(3) could be invoked only if three conditions were satisfied:
1. The impugned law must be made by the Legislature of a State post-Constitution.
2. The impugned law must impose or authorize the imposition of a tax on goods declared by Parliament as essential for the life of the community.
3. The law must be reserved for the President's consideration and have received his assent.

The Court found that the first condition was satisfied as the notification was issued under Act 30 of 1950, which was enacted post-Constitution. However, the second condition was not met because the parliamentary declaration of "iron and steel" as essential goods was made after the enactment of the Madhya Bharat Act. Therefore, the notification did not contravene Article 286(3) since the declaration was not pre-existing at the time of the Act's passage.

The Court also referenced prior judgments, such as Sardar Soma Singh v. The State of Pepsu and Firm of A. Gowrishankar v. Sales Tax Officer, which supported the conclusion that Article 286(3) applies only to post-Constitution laws and declarations.

Conclusion:
The Court concluded that the impugned notification did not contravene Article 286(3) because the parliamentary declaration of "iron and steel" as essential goods was not in existence at the time of the Madhya Bharat Act's enactment. Therefore, the appeals were dismissed, affirming the High Court's decision. Appeals were dismissed with costs.