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TMI Blog2002 (10) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... 679, Civil Appeal No. 7680, Civil Appeal No. 7681, Civil Appeal No. 3661, Civil Appeal No. 3662, Civil Appeal No. 3663, Civil Appeal No. 3664, Civil Appeal No. 3665, Civil Appeal No. 3666, Civil Appeal No. 3667, Civil Appeal No. 3668, Civil Appeal No. 3669, Civil Appeal No. 3670, Civil Appeal No. 12583, Civil Appeal No. 12584, Civil Appeal No. 12585, Civil Appeal No. 12586, Civil Appeal No. 12587, Civil Appeal No. 3834, Civil Appeal No. 3835, Civil Appeal No. 3836, Civil Appeal No. 12877, Civil Appeal No. 12878 of 1996, Civil Appeal No. 346 of 1997, Civil Appeal No. 3993 of 1999, Civil Appeal No. 6940, Civil Appeal No. 6941, Civil Appeal No. 6942, Civil Appeal No. 6943, Civil Appeal No. 6944, Civil Appeal No. 6945, Civil Appeal No. 6946, Civil Appeal No. 6947, Civil Appeal No. 6948, Civil Appeal No. 6949, Civil Appeal No. 6950, Civil Appeal No. 6951, Civil Appeal No. 6952, Civil Appeal No. 6953, Civil Appeal No. 6954, Civil Appeal No. 6955, Civil Appeal No. 6956, Civil Appeal No. 6957, Civil Appeal No. 6958 of 2002, Writ Petition (Civil) No. 82 of 1996, Writ Petition (Civil) No. 36, Writ Petition (Civil) No. 141, Writ Petition (Civil) No. 144, Writ Petition (Civil) No. 178, Writ Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as the rice procured therefrom is exported. The second is that the High Court committed error in holding that with omission of section 9 from the statute, amendment of section 6 and inclusion of section 15-A with retrospective effect from May 27, 1971, the liability to pay purchase tax is regulated by section 6 read with section 15 and adjustments, if any, could be made under section 15-A of the Haryana Act. The case of the State of Haryana, as projected by the learned Senior Counsel, Mr. Mahendra Anand, is that the Haryana Act contains more charging sections than one, viz., sections 6, 9 and 17; as section 9 has been omitted and sections 2(p), 6, 15 and 15-A have been amended retrospectively, the assessee is liable to pay tax on purchase of raw material. 5. For appreciating the contentions, we shall take up the cases falling under groups (A)(i) and (B), which go together. It would suffice to refer to the facts giving rise to Civil Appeal Nos. 11175- 11178 of 1995. The assessee is a miller-exporter who purchases paddy in the State of Haryana, mills the same and exports the rice procured therefrom to places outside the territory of India. For the assessment years 1982-83, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: "286. Restrictions as to imposition of tax on the sale or purchase of goods.-(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,- (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29-A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 8.. A plain reading of clause (1) of article, noted above, shows that it lays down restrictions on a State law as to the imposition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of those goods out of the territory of India, shall also be deemed to be in the course of such export if such last sale or purchase took place after and was for the purpose of complying with the agreement or order for or in relation to such export. In other words, the penultimate sale or purchase before the sale or purchase occasioning the export of those goods shall be treated as a sale or purchase in the course of export of the goods. This is incorporated to get over the judgment of this Court in Mod. Serajuddin v. State of Orissa See [1975] 36 STC 136 (SC). (1975) 2 SCC 47. 10.. Next, we shall advert to section 15 of the CST Act which runs thus: "15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State.-Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely: (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Act on sale or purchase of such goods and is again levied under the CST Act in respect of sale of such goods in the course of inter-State trade or commerce. The edict of clause (c) makes it clear that a State law which imposes or authorises the imposition of tax on sale or purchase of rice or paddy inside the State has to be treated in the following manner: where a tax has been levied in respect of sale or purchase inside the State on paddy, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on it (such paddy); for example, assuming that in a State the rate of tax on the sale or purchase price of paddy is one per cent and of rice is four per cent, then the tax leviable on the sale of rice will be reduced by one per cent; consequently, the tax payable on the sale of rice would be only three per cent. 13.. Clause (ca) is inserted by the Finance (No. 2) Act, 1996 (33 of 1996) with effect from September 28, 1996. It directs that where a tax on sale or purchase of paddy is leviable under a State law and the rice procured out of such paddy is exported out of India then for purposes of penultimate sale [under section 5(3)], the paddy a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State at the stage hereinafter provided- (a) on declared goods at the stage specified under section 17; (b) and (c) ..................... Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specified in Schedule B or who executes a sub-contract with a contractor who is liable to pay tax in respect of the works contract of which the sub-contract is a part: Provided further that in the case of a dealer,- (2)(a) ............... (b) who manufactures or processes any goods for sale, the liability to pay tax shall commence, from the date on which his gross turnover, during any year, first exceeds the taxable quantum; (c) .............. (d) who deals in declared goods, the liability to pay tax shall commence from the date on which his gross turnover of such goods exceeds the taxable quantum; (e) to (h) ................ (3) to (5) ............". 16.. A perusal of the above provision would show that it is a charging section. It opens with the phrase "subject to the other provisions of this Act"; having been given retrospective effect from May 27, 1971, it would apply in regard to the assessment years in question, the last of them being 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956; or (c) ................in the circumstances in which no tax is payable under any other provision of the Act, there shall be levied, subject to the provisions of section 17 a tax on the purchase of such goods at such rate as may be notified under section 15. " 20.. This provision has had a chequered history. In Goodyear India Limited v. State of Haryana [1990] 76 STC 71 (SC). (1990) 2 SCC 71, it was declared ultra vires the power of the State Legislature. However, in Murli Manohar & Co. v. State of Haryana [1991] 80 STC 79 (SC). (1991) 1 SCC 377, it was explained that the unconstitutionality was confined to assignment sales. Ultimately, in Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98 (SC). (1993) Suppl 4 SCC 536, it was declared that judgment of this Court in Goodyear's case(1) (1990) 2 SCC 71 was not a good law. Consequently, section 9(1)(b) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufactured goods are sold within the State, no purchase tax is collected on the raw material, evidently because the State gets larger revenue by taxing the sale of such goods. (The value of manufactured goods is bound to be higher than the value of the raw material). The State Legislature does not wish to-in the interest of trade and general public-tax both the raw material and the finished (manufactured) product. This is a well-known policy in the field of taxation. But where the manufactured goods are not sold within the State but are yet disposed of or where the manufactured goods are sent outside the State (otherwise than by way of inter-State sale or export sale) the tax has to be paid on the purchase value of the raw material. The reason is simple: if the manufactured goods are disposed of otherwise than by sale within the State or are sent out of the State (i.e., consigned to dealer's own depots or agents), the State does not get any revenue because no sale of manufactured goods has taken place within Haryana. In such a situation, the State says, it would retain the levy and collect it since there is no reason for waiving the purchase tax in these two situations. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability to pay purchase tax was regulated by section 6 read with section 15 and adjustments, if any, could be made under section 15-A of the Haryana Act. Mr. Mahendra Anand supported the conclusion of the High Court on the basis of retrospective amendment of sections 2(p), 6, 15 and 15-A of the Haryana Act. We shall take up these contentions. 27.. We have already referred to sections 6 and 9 of the Haryana Act. To recapitulate, section 6, which is a general charging section, provides that every dealer shall be liable to pay tax under the Act on the sale or purchase of, inter alia, declared goods by him in the State at the stage specified under section 17. It says that at the stage of sale or purchase of the declared goods, the tax shall be levied and paid as specified against such goods in Schedule D. It also provides that where the goods have not been subjected to tax at any of the stages of sale or purchase specified in Schedule D, the tax shall be levied and paid by a dealer liable to pay tax under the Act at the stage of the last purchase of such goods by him, after providing deductions admissible under section 27. It is not possible to read that the section by itself c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because no tax can be levied and collected on the purchase of paddy either under section 6 or under any other provision of the Haryana Act, that section 9 imposes the tax, except in the circumstances provided in clause (b) of sub- section (1) of section 9. This is the view taken by a Bench of three learned Judges of this Court in Murli Manohar's case [1991] 80 STC 79 (SC). (1991) 1 SCC 377 where the liability under section 9 was directly in question. This view was reiterated by two more Benches of this Court in Hotel Balaji's case [1993] 90 STC 477 (SC). (1993) Suppl 4 SCC 536 and K.B. Handicrafts Emporium [1993] 90 STC 477 (SC). (1993) Suppl 4 SCC 589. The Full Bench of the High Court, in our view, was not right in declining to act upon the ratio of the judgments in the aforementioned cases. In the result, we hold that the amendment to the definition of "turnover" in clause (p) of section 2 and of section 6 does not affect the position when section 9 is part of the statute. 29.. Connected with the topic under discussion are the cases arising under the Punjab Act-Group (B). It is urged that section 4-B of the Punjab Act is analogous to section 9(1)(b) of the Haryana Act and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom any source and- (i) uses them within the State in the manufacture of goods specified in Schedule B, or (ii) uses them within the State in the manufacture of any goods, other than those specified in Schedule B, and sends the goods so manufactured outside the State in any manner other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or (iii) uses such goods for a purpose other than that of resale within the State or sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or (iv) sends them outside the State other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, and no tax is payable on the purchase of such goods under any other provision of this Act, there shall be levied a tax on the purchase of such goods at such rate not exceeding the rate specified under sub-section (1) of section 5 as the State Government may direct." 35.. The aforequoted section makes it clear that it can be invoked when a dealer who is liable to pay tax under the Act: (a) purchases any goods (refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Judges opined thus: "In our opinion, the purpose of section 4-B is altogether different. It is designed really to identify and affirm-in a broad sense, create-the levy of purchase tax in some cases and to provide for exemption from purchase tax in certain other specified situations. This is done in the interest of manufacturers-dealers, consuming public and other dealers-a common feature in almost all the sales tax enactments......." 39.. Though section 4-B of the Punjab Act is not in iisdem terminis with section 9(1)(b) of the Haryana Act, however, they are in pari materia. It is not the similarity of the said provisions alone that would determine the liability of a dealer to pay purchase tax on paddy under the said Acts. It is the ambit of charging sections in those Acts, which will be determinative. Section 6 of the Haryana Act, as pointed out above, did not charge purchase tax on paddy before October 14, 1990 and in the circumstances mentioned in section 9(1)(b) imposed purchase tax but provided for its exemption in specified situations. 40.. We must now examine the scope of charge under section 4 of the Punjab Act which, in so far as it is relevant for our purpose, is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " but also on "all purchases made" and negatived the contention that no purchase tax was payable under section 4 of the Act on goods other than those mentioned in Schedule 'C' (contains paddy and rice). It was held: "Firstly, clause (ff) in section 2 is not a charging section. It only defines 'purchase'. Secondly, the definition not only includes the purchase of Schedule C goods but purchase of other goods which are subject to purchase tax under any other provisions of the Act. The fact that the words 'or of goods on the purchase whereof tax is payable under any provisions of this Act' were inserted in this definition by the same amendment which introduced section 4-B into the Act does not mean that the said words are confined to section 4-B. If that were the intention, the Legislature would have used appropriate words to that effect. Moreover, as explained by us hereinbefore, section 4-B is designed for a different purpose. The said definition cannot, therefore, be read in derogation of section 4(1) nor can the levy created by section 4(1) be curtailed or cut down in any manner by the said definition." 43.. Section 29, which provides exemption in certain cases, is also of no ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (3) of section 5 of the CST Act and that they require reconsideration. On the other hand, Mr. Mahendra Anand strenuously urged that paddy and rice were two different "goods", therefore, on the export of rice the assessee could not claim exemption on the purchase of paddy either under section 5(3) of the CST Act or under article 286(1)(b) of the Constitution of India because penultimate sale was not that of rice but of paddy. He argued that only when paddy would undergo various processes, which tantamounts to manufacture, rice could be procured. 46.. It may be noticed that the principle laid down by this Court in Ganesh Trading Co. (1974) 3 SCC 620 and Babu Ram Jagdish Kumar case (1979) 3 SCC 616 was accepted by the Parliament and section 14 of the CST Act was amended to show that paddy and rice are two distinct goods. In Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer (1996) 1 SCC 468, this Court held that to claim the benefit under section 5(3) of the CST Act, a dealer would have to establish the identity of the goods purchased and the goods exported out of the territory of India. When in order to fulfil an export obligation some goods are purchased and proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and section 15(c) of the CST Act are mandatory and this accounts for clause (iii) of the proviso to sub- section (1) of section 15 of the Haryana Act, therefore, section 15-A of the Haryana Act, in so far as it denies the benefit of adjustment/ refund of purchase tax in regard to paddy, is unconstitutional and ultra vires; in the alternative it was urged that the amendment of section 15-A by Ordinance 1 of 1992 took away the benefit of adjustment/refund retrospectively from May 27, 1971, availed by the assessees for the last twenty-one years which is unjust, arbitrary and unconstitutional. 47.. Section 15-A was first inserted in the Haryana Act on January 25, 1990 and was given retrospective effect from May 27, 1971. Like its companion sections, it also underwent many changes. We are concerned with section 15-A, as substituted by the Haryana Act 9 of 1993 on February 10, 1993 retrospectively from May 27, 1971. It was as under: A new section 15-A was substituted by Haryana Act No. 12 of 2000 dated 19-9-2000, however, it was not given retrospective effect.15-A. Adjustment or refund of tax in certain cases.-Subject to the provisions of clause (iii) of proviso to sub-section (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable on the sale, as the case may be, shall be refundable if the manufactured goods are sold in the State or in the course of inter-State trade or commerce or in the course of export out of the territory of India. It is plain that this clause provides for refund of tax paid on the last purchase of raw material, except on paddy, cotton and oil-seeds. However, the proviso creates an exemption to the refund of tax when the manufactured goods have been sold before the 1st day of January, 1988. What is relevant to note is that the purchase tax paid on paddy, cotton and oil-seeds (which are used as raw material) can neither be refunded nor adjusted. It is in view of this provision that show cause notices were issued to the assessees denying both the benefit of adjustment as well as refund of tax paid on the purchase of paddy. 49.. The last mentioned amendment inserted in section 15-A, the following words "subject to the provisions of clause (iii) of proviso to sub-section (1) of section 15". Clause (iii) of proviso to sub- section (1) of section 15 of the Haryana Act reads as under: "15.(1) Subject to the provisions of this Act, there shall be levied on the taxable turnover of a deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows that the assessees are entitled to adjustment of purchase tax paid on paddy when the rice procured therefrom is taxed. 52.. It is true that section 15-A does not permit refund of purchase tax paid on paddy, cotton and oil seeds by an assessee though such a relief is available in regard to other goods. In the light of the above discussion, the challenge to section 15-A on the ground of violation of section 15(c) of the CST Act or article 286(1)(b) of the Constitution cannot be sustained because the only relief that is granted by section 15(c) is reduction of tax leviable on the sale of rice procured from out of paddy, where tax has been levied on sale or purchase of such paddy inside the State. This relief is incorporated by the Haryana Act in clause (iii) of the proviso to sub-section (1) of section 15. Even clause (b) of sub-article (1) of article 286 does not provide for exemption of tax on the purchase of paddy. There is no other provision either in article 286 or in the CST Act which bars a State from levying tax on the sale or purchase of paddy which is not exported out of the territory of India. Section 15-A proceeds on the premise that purchase tax is payable, inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The Acts did not, however, obtain the assent of the President, as required by article 255 of the Constitution. The defect was cured by issuing Ordinance No. 4 of 1964 which was replaced by Act 22 of 1964 for which the assent of the President was duly obtained. Section 2 of the said Act of 1964 retrospectively re-enacted the amendments to section 3 of the principal Act by Acts of 1961 and 1962 and section 4 of the Act validated all the collections and levies under the earlier Acts and also purported to cure the infirmity in the said earlier Act arising from non-compliance with article 255. The petitioner therein challenged the validity of the said Ordinance as well as the Act of 1964 under article 32 of the Constitution, which failed. 57.. In J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India [1988] 68 STC 421 (SC). (1987) Supp. SCC 350 by section 51 of Finance Act, 1982, rules 9 and 49 of the Central Excise Rules, 1944 were amended retrospectively from the date of framing of the Rules in 1944. After referring to the cases of Rai Ramkrishna [1963] 50 ITR 171 (SC). [1964] 1 SCR 897 and Jawaharmal [1996] 1 SCR 890, it was observed that the Court might have to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. It cannot be said to be clarificatory for, it neither supplies an obvious omission in the CST Act nor purport to explain any provision of that Act. It confers a new benefit hitherto not available. It is not given retrospective effect expressly. There is also nothing to imply that it has retrospective operation. However, had it been declaratory or curative, it would have been treated as retrospective. [See: Shri Chanan Singh v. Srimathi Jaikaur (1969) 2 SCC 429]. 62.. We do not also find any force in the contention of Mr. Chidambaram that in not granting refund of purchase tax only in regard to three goods-paddy, cotton and oil seeds-there is violation of article 14 of the Constitution. It is a settled proposition of law that in the matter of taxation, the Legislature has greater latitude to give effect to its policy of raising revenue and for that purpose selecting the goods for taxing. The classification of goods based on the policy of taxing some goods and leaving others outside the net of taxation cannot be assailed as violative of article 14 of the Constitution. (See: Steelsworth Limited v. State of Assam [1962] Suppl. 2 SCR 589 and Gopal Narain v. State of Uttar Pradesh [ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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