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TMI Blog1952 (12) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... livered outside the State of Bombay as a direct result of such sales or purchases for the purposes of consumption outside the State of Bombay. The Advocate- General has raised various preliminary objections to the maintainability of this petition, and perhaps it would be best, before we consider the merits of this petition, to consider these objections. The first objection is that the petitioners have an efficacious alter- native remedy and therefore it would not be proper for the Court to issue a writ in such a case. It is pointed out that the substantial relief which the petitioners seek in the petition is the avoidance of assessment under the Sales Tax Act, and the Advocate-General's contention is that it is open to the petitioners to pay the tax under protest and then file a suit for the recovery of that tax on the ground that the tax was illegaly recovered. For this purpose reliance is placed on a decision of this Court in Civil Application No. 735 of 1952, Walchandnagar Industries Ltd. v. The State of Bombay. In that case the petitioner company challenged the validity of the Bombay Sugarcane Cess Act of 1948 and we pointed out in that case that Arti- cle 226 was not intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in that case was that the peti- tioner should in the first instance approach a High Court under Article 226 and then approach the Supreme Court under Article 32 and the Supreme Court negatived this contention. In our opinion, if the Supreme Court is constituted the protector and guarantor of fundamental rights, equally so is the High Court constituted the protector and guarantor of funda- mental rights under Article 226. It would lead to a very curious result if a petitioner could approach the Supreme Court under Article 32 on the allegation that his fundamental rights were contravened and he could not do so as far as the High Court was concerned on an identical allega- tion under Article 226. The powers of the Supreme Court under Article 32 and of the High Court under Article 226 are concurrent and if the (1) [1950] S.C.R. 594. Supreme Court has held that it cannot refuse the application of any petitioner who comes before it complaining of contravention of fund- mental rights, equally so the High Court cannot refuse to entertain the application of a person who comes before it under Article 226 on the ground that his fundamental rights should be protected. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also complained that under the provisions of the Act they are required to obtain registration and to obtain a licence and in view of the fact that the provisions of the Act require them to do these acts, the Act contravenes the provisions of Article 19(1)(g) of the Constitution. In other words, the petitioners' contention is that their right to carry on business guaranteed to them under Article 19(1)(g) has been unreasonably restricted by the provisions of the law. Even assuming that the petitioners' grievance was confined to the imposition of an illegal impost, we are not at all sure that a party is not entitled to come to Court and to say, "I am likely to be assessed in respect of an illegal tax, prevent the assessment". The initiation of assess- ment ultimately results in a levy of tax and it has been laid down by the Supreme Court in The State of Tripura v. The Province of East Bengal(1), that the initiation of assessment constitutes an actionable wrong which a party is entitled to prevent by an order issued by the Court. The order of the Court would be to the effect that the officer concerned who has initiated the assessment should not complete an illegal and unauthorised a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no view of the case could be decided by the authorities set up under the Sales Tax Act. The jurisdiction of those authorities is limited to decide questions regarding the validity of the assessment, but no jurisdiction has been conferred upon them to adjudicate upon the validity of the Act on the ground that it affects the fundamental rights of the petitioners. The further contention of the Advocate-General is that in effect the petitioners are seeking a mandamus in order to compel the respondents to forbear and desist from enforcing against them any of the provisions of Act XXIV of 1952, and the Advocate-General argues that a mandamus can only issue on the basis that the Act which confers statutory obliga- tions and duties upon an officer is a valid Act. The Advocate-General says that the very basis of mandamus is that an officer has got to carry out statutory duties or obligations and it is not open to the petitioner to challenge the statute if he wants the officer concerned to carry out any duties imposed upon him by that statute. For this purpose reliance is placed on Lady Dinbai's case(1) decided by this Court. The principle put forward by the Advocate-General is unexceptiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed, for the purposes of this Act, to have taken place in the said State, irrespective of the fact that the property in the goods has, by reason of such sale, passed in another State." Therefore this definition brings within its ambit all sales without exception where there is a transfer of property in goods for a valuable consideration. It also brings within the ambit of the statute sales where, although property may have passed outside the State of Bombay, the goods are delivered for consump- tion as a result of the sale in the State of Bombay. Therefore, according. to this explanation, even though the seller may be, say, in Madras and the property in the goods may have passed in Madras, if the goods have been delivered for consumption in the State of Bombay, it would come within the definition of "sale" given in the statute. Chapter II deals with Sales Tax Authorities and Tribunal, and Chapter III deals with General Tax. The charging section is Section 5 and the scheme of the section is that if a person has a turnover in respect of all sales made within the State of Bombay during any of the three consecutive years immediately preceding the first day of April, 1952, exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of such balance, and the balance remaining after making deductions under clauses (i) and (ii) of this section shall be the taxable turnover for the purposes of sub-section (1) of Sec- tion 6. Therefore the scheme of Section 7 is clear. Those goods which are declared tax free under Section 8 have got to go out of the turnover referred to in Section 5. Then such other sales have to go out as may be prescribed by the rule-making authority to which reference will be made a little later. It is pertinent to note that the Legislature has given no indication whatever as to what are the sales which may be prescribed and what are the sales which may be deducted or should be deducted from the turnover referred to in Section 5. Then Section 8 deals with goods which are exempted from payment of general tax. Section 9 deals with registra- tion of dealers, and again it is important to note that every dealer who is liable to pay the general tax under Section 5 has to apply for registration if his turnover in respect of all sales exceeds Rs. 30,000, and for the pur- pose of this section the deductions to be made under Section 7 have not to be taken into consideration at all. Therefore, again, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition. Then Chapter VII deals with proceedings and various authorities set up under the Act for the purpose of assessment, appeals, references and revisions. Chapter VIII deals with offences and penalties, and severe penalties are prescribed for dealers who carry on business without applying for registra- tion or grant or renewal of licence in contravention of Sections 9, 12 or 26, also for failure to furnish any return or statement, failure to keep accounts, neglect to furnish any information, and the penalty includes simple im- prisonment which may extend to six months. Chapter IX deals with miscellaneous matters, but the important section in this chapter is Sec- tion 45 which constitutes the State Government the rule-making authority and it provides: "The State Government may, subject to the condition of previous publication, make rules for carrying out the purposes of this Act," and then, without prejudice to the generality of the power conferred upon the Government, particular instances are given for which the State Government may prescribe rules, and sub-clause (e) provides for rules in respect of other sales, turnover in respect of which may be deducted from a dealer's tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. The third restriction is that the Legislature of a State is prohi- bited from taxing a sale or purchase where such sale or purchase takes place in the course of inter-State trade or commerce. There is also a fur- ther restriction contained in clause (3) with which we are not concerned, and that is with regard to taxing a sale or purchase of goods declared by Parliament to be essential for the life of the community. The Constitution has supplied an explanation to the first restriction imposed upon the State Legislature, viz., a restriction with regard to a sale or purchase which takes place outside the State, and the explanation is to the following effect: "For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." The main part of the argument both of the Advocate-General and Mr. Seervai, from both of whom we have received consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reason why in construing entry 54 in List II of the Seventh Schedule in the Constitution we should give to the expres- sion "sale" only its legal technical meaning and not the wider meaning which was accepted and acted upon under the Government of India Act. Therefore, if the Constitution had merely provided for Articles 245 and 246(3) and entry 54 in List II of the Seventh Schedule, the power of the State Legislature would have been identical with the power of the Pro- vincial Legislature under the Government of India Act. But the Con- stitution did not want the State Legislature to have the same power with regard to taxes on sales and purchases of goods as the Provincial Legislatures had under the Government of India Act and that is why Article 286 was enacted and restrictions were placed upon the powers of the State Legislature, and the real and substantial question for our determination is, what is the extent and the nature of the restriction placed upon the powers of the State Legislature under Article 286? Turning to the most important restriction with which we are con- cerned, viz., that a State Legislature has no power to impose or authorise the imposition of a tax on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or a transaction of sale which takes place outside the State. Now, when we come to the explanation, before we construe it, it is necessary to bear in mind what the object and function of an explanation in a section or an article of a statute or Constitution is. An explanation is not a proviso. It does not carve out of the section something which the section has provided and deal with that part which is carved out. It is not the function or purpose of an explanation to extend the scope of the section itself or to restrict its operation. An explanation ordinarily is intended to apply to the whole ambit of the section and to throw light on the construction of the words used by the Legislature. An explanation very often introduces a legal fiction and treats the legal fiction as a reality contained in the section itself; and when we turn to the explanation with which we are concerned in this case we find that it also creates a legal fiction or raises a statutory presumption with regard to the meaning and scope of the expression "outside the State" used in Article 286(1). What it says is that if you find that goods have been actually delivered as a direct result of a sale or purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the goods passed in another State, even though the goods were delivered in Bombay for the purpose of consumption, the Bombay Legislature would have had no authority to tax those goods. The explanation has removed that doubt and has conferred that power upon the State Legislature. In other words, according to the Advocate-General what would have been a sale outside the State by legal fiction has been made a sale inside the State. The Advocate-General is conscious of the fact that in asking us to put this construction upon the explanation he is making the explana- tion play a rather unusual role. He, therefore, suggested that really the explanation should have been described as a proviso and should have appeared after Article 286(1)(a), but inasmuch as clause (b) was inter- posed the proviso was postponed to a lower position. But why the Constitution-makers should call a proviso an explanation is a mystery which the Advocate-General has not been able to solve. We take it that the Constitution-makers were familiar with the distinction between a proviso and an explanation and when advisedly they have used the expression "explanation" and not a proviso, we must before accepting the Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue meaning to be given to the expression "in the course of import of the goods into, or export of the goods out of, the territory of India", but certain observations in the judgment throw considerable light on the principles which must be adopted in construing Article 286. The Supreme Court gave a very extended meaning to the expression "in the course of" and held that a sale by export involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for trans- port out of the country by land or sea. The learned Judges point out in their judgment that they have arrived at this conclusion in order to prevent the imposition of cumulative burden on the export-import trade of the country which is of great importance to the nation's economy, and they sound a note of warning against importing principles laid down by * Since reported as the State of Travancore-Cochin and Others v. The Bombay Company Ltd., Alleppey, and Others [1952] (3 S.T.C. 434). the American Supreme Court in construing Article 286. If the Supreme Court was anxious to prevent cumulative burden on the export-import trade of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unnecessary to pronounce upon this interesting question as it does not really directly arise for our consideration on this petition. The Advocate-General has relied on two Madras judgments which we might briefly look at. The first is a judgment delivered in Criminal Appeal No. 129 of 1952, Poppatlal Shah v. State of Madras(1). The (1) Since reported at 3 S.T.C. 396. contention there of the assessee who was assessed to sales tax was that as the title to the goods sold passed only in Calcutta and the goods were delivered to the purchaser on payment of the price at Calcutta, there was no sale within the Province of Madras and therefore there was no liability to pay the tax under the Act; and the Advocate-General relies on certain obser- vations of Mr. Justice Venkatarama Ayyar who delivered the judgment of the Court. The learned Judge points out that the question as to whether there was a sale within the Province of Madras would have to be deter- mined on a factual basis as to where the transaction took place and not on a consideration of questions as to where property passed in the goods. He further points out that the word "sale" has both a legal and a popular sense and he emphas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted for the pur- pose of restricting the powers of the Legislature. Further, again with respect, the learned Judge has faced with equanimity the possibility of double taxation. It must be said in fairness to the learned Judge that he had not the benefit of the Judgment of the Supreme Court which we have. It has also further to be remembered that this judgment was wholly coloured by the view taken by the Court as to the true meaning of the expression "in the course of import and export" and the view that the Court took has now been found to be erroneous in view of the decision of the Supreme Court. Further, in construing the explanation the Madras High Court took into consideration that this explanation was not originally in the bill and it came to be inserted at the last stage out of deference to the representations made on behalf of certain States that the law as it stood would prevent them from taxing commodities which would be used in the State and that a power to tax such transactions should be conferred on them. Now, no extraneous aids are permissible for construing a provision of the Constitution and certainly the extraneous aid availed of by the Madras High Court is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding Rs. 30,000 and the turnover is in respect of sales made within the State of Bombay as understood by the definition given in Section 2(14). The very liability to pay general tax under Section 5 arises in respect of those persons whose turnover exceeds Rs. 30,000, the turnover being made up, as pointed out, of all sales made within the State of Bombay. It is also a striking feature of this Act that even when the taxable turnover is determined under Section 7 and for the purposes of taxable turnover the sales of certain goods enumerated in Section 8 are to be excluded, the pro- hibited sales, if we may use the compendious expression, are not excluded under Section 7 at all. A general provision is made under sub-clause (b) of Section 7(i) that the turnover in respect of such other sales as may be prescribed may be deducted from his turnover. Therefore an authority is given to the rule-making power to deduct turnovers in respect of certain sales, but there is no compulsion upon the authority to exclude any particular sales and a complete discretion is given to the authority either to exclude or not to exclude any sales. In our opinion, reading these sections with regard to the ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rules deducting sales prohibited under the Constitution. There is no obligation whatever upon the State Government to deduct any sales by rules and it is clear that the power conferred upon the State Government to deduct certain sales assumes the power not to deduct. Therefore the very provision in Section 7 autho- rising the Government to deduct certain sales which may be prescribed proceeds on the necessary assumption that the State Legislature had the power to tax those sales and would have the power to tax those sales if they were not deducted by the rules framed by the State Government. Further, Section 45 makes it clear that the power of the State Govern- ment to frame rules is limited by the condition that it must be exercised for carrying out the purposes of the Act, and as we have already pointed out, the purpose of the Act is to tax sales irrespective of the consideration whether the sales are prohibited under the Constitution or not. Rule 5 on which the Advocate-General relies enumerates eight different kinds of sales which are to be deducted in calculating the taxable turnover under Section 7, and these two sales which are prohibited by the Consti- tution viz., sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (v) of sub-rule (2) of rule 5 raises a statutory presumption that where the goods have not been consigned to a place outside the State of Bombay within three months from the date of sale, it shall be presumed unless the contrary is proved to the satisfaction of the Collector that the sale has not taken place in the course of export of the goods out of the territory of India or in the course of inter-State trade or commerce, as the case may be. Again, an attempt at raising a statutory presumption with regard to prohibited sales is a clear indication that the State Government was of the opinion that it could tax such sales provided the conditions laid down by it were not satisfied. Then explanation 2 to rule 5(2)(i) provides that the provisions of clause (i) shall not apply to motor vehicles despatched to a place in India outside the State of Bombay by road driven by their own power, provided a certificate is obtained from an authority mentioned in that explanation. Therefore a concession is given to motor vehicles driven by their own power, but that concession is hedged round with a certain condition. In other words, if a motor car is sold in the course of inter-State commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the Hindu Women's Rights to Property Act was ultra vires because the Legislature had attempted to legislate with regard to agricultural land. In that case we also relied on the well-known case of Macleod v. Attorney-General for New South Wales(3) and we referred to the observation of Lord Halsbury at page 457: (1) (1951) 53 Bom. L.R. 837 at p. 856. (2) [1941] 3 F.C.R. 12. (3) [1891] A.C. 455. "........Their Lordships do not desire to attribute to the Colonial Legislature an effort to enlarge their jurisdiction to such an extent as would be inconsistent with the powers committed to a colony........" Now, it is perfectly correct that the expression "sale" is a word of wide and general import and the Advocate-General would have been on very strong grounds if the Legislature had merely used the expression "sale" in the Act in question. Then it would have been our duty to presume that the Legislature knew its own limitations and to construe the expression "sale" as falling within the legislative powers of the Legislature rather than outside those powers. But unfortunately "sale" has been defined by the Legislature. Neither in the case before Sir Maurice Gwyer nor in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Article 245 are subject to the provisions of the Constitution. The powers are not unlimited and the Constitution itself provides various limitations upon those powers and in our opinion although the language of Article 286 is not identical with the language in Article 303, if the Constitution provides that no law of a State shall authorise the imposition of a tax, it does con- tain a restriction or a limitation upon the legislative power of the Legis- lature. A similar question came for consideration before the Privy Council in a case reported in Punjab Province v. Daulat Singh and Others(1). As is well-known, the scheme adopted in our Constitution with regard to the distribution of powers between the Union Legislature and the State Legislature is very similar to the scheme embodied in the Government of India Act, and the Privy Council was considering the Punjab Alienation of Land Act and what was contended before it was that certain pro- visions of that Act were ultra vires of the Legislature because it con- travened Section 298 of the Government of India Act. Section 298 provided that no subject of His Majesty shall be subjected to disability of any sort by reason of race, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to a particular matter and having legislated with competence the law may be void by reason of some provision of the Constitution. If in this case the legislature had the competence to legislate with regard to tax on pro- hibited sales, then undoubtedly the question would arise whether the law passed was void under any of the provisions of the Constitution. But if the view we take is correct that the competence of the legislature is wanting in respect of prohibited sales, then no question of considering the validity of the law passed by the legislature can arise. Of course, there are two other points which must be also borne in mind. One is that if the Act itself is bad, the rules made under it cannot have any greater efficacy, and further, even this argument of the Advocate-General only applies to the extent that the rules provide for sales in the course of the import of the goods into or export of the goods out of the territory of India and sales in the course of inter-State trade or commerce. But, as pointed out, neither the Act nor the Rules exempt sales which are outside the State within the meaning of Article 286(1)(a) read with explanation. Therefore, in our opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to tax all dealers whether their turnover is Rs. 10 or Rs. 30,000. Therefore some arbitrary line has to be drawn and the line was drawn at Rs. 30,000 in the case of general tax and Rs. 5,000 in the case of special tax. Mr. Seervai then complains against Section 5(3) and Section 10(4) of the Act. Section 5(3) provides that once a dealer has become liable to pay the general tax, he shall continue to be so liable until the expiry of three consecutive years although during these three years he does not reach the limit of the turnover laid down in Section 5(1), and he may continue to be liable for such further period after the expiry of the three year period as may be prescribed and he would continue to remain liable to pay the general tax. Mr. Seervai says that clearly this is a most arbitrary classification that because a man had a turnover of Rs. 30,000 in one year, although for the three subsequent years and for an indefinite period there- after his turnover may fall to anything between Rs. 30,000 and Rs. 100, he would still be liable to pay tax, and Mr. Seervai says that no possible justification can be advanced for a provision like this. The answer given by the Advocate-Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act would be an illegal impost if the Act is ultra vires and that constitutes an unreasonable restriction upon the right of the petitioners to carry on their business. There is only one final point which was not seriously pressed by the Advocate-General, but as it has been taken we might deal with it. The point is that the petitioners are not entitled to any relief under Article 19 of the Constitution because they are not citizens. It is pointed out that out of the seven petitioners six are corporations and that corporations cannot be citizens within the meaning of the Constitution. With regard (1) [1952] S.C.R. 572. to the seventh it is contended that it also is not a citizen because it is an association or a firm and a firm also cannot claim the benefit of Article 19. In our opinion, there is no substance whatever in this contention. Peti- tioner No. 7 is the firm of Metro Motors. It is well-known and well understood that a firm has no legal entity. It is merely a compendious name of the partners of whom it is constituted. Therefore we have on the record not a corporation or a legal entity consisting of Metro Motors, but what we have on record before us is the partners of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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