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TMI Blog1956 (11) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is that in regard to the commodities specified in the several sub-sections the tax is levied only at such single point either set out in the body of the Act or left to be prescribed by the rules. The impugned enactment added the following items to section 5 and subjected them to tax at a single point at specified rates. The material portion of section 2 of the impugned Act runs thus: "In the Madras General Sales Tax Act, 1939..........(ii) in section 5, after item (vi), the following items shall be added, namely: '(vii) the sale of cigars and cheroots at less than two annas per cigar or cheroot, and bidis, snuff, chewing tobacco or any other product manufactured from tobacco, shall be liable to tax under section 3, subsection (1), only at the point of the first sale effected in the State of Madras by a dealer but at the rate of six pies for every rupee on his turnover; (viii) raw tobacco, whether cured or uncured, shall be liable to tax under section 3, sub-section (1), only at the point of the first purchase effected in the State of Madras by a dealer but at the rate of six pies for every rupee on his turnover: Provided that where a dealer who has paid tax in respect of his tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed to a tax of Rs. 31,250 for the year ending 31st March, 1956, with a direction that the tax should be paid in monthly instalments of Rs. 2,604 and threatening it with compulsory recoveries and penalties in the event of the tax not being paid on the due dates. The petitioner had been paying these instalments until February, 1956, when it filed the present writ petition. The petitioner was further required to take out a licence for conducting its business and it complied with this requisition. It paid the licence fee demanded which was based on the turnover as estimated by the petitioner itself, namely, Rs. 10,00,000 per year. This petition was filed in February, 1956, for an appropriate direction under Article 226 of the Constitution restraining the Deputy Commercial Tax Officer, Salem, from levying or collect-ing the tax. It will be seen that the provision relevant to this peti-tioner's complaint is sub-section (vii) of section 5, namely, a tax on thefirst sale of bidis effected in the State of Madras at Re. 0-0-6 per rupeeon the turnover. W.P. No. 1038 of 1956: The petitioner here is the proprietrix ofa cheroot factory. For the purpose of manufacture she purchased rawtobac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial Tax Officer, Salem, from levying or collecting the tax. It will be seen that the provision relevant to this petitioner's complaint is sub-section (vii) of section 5, namely, a tax on the first sale of bidis effected in the State of Madras at Re. 0-0-6 per rupee on the turnover. W.P. No. 1038 of 1956: The petitioner here is the proprietrix of a cheroot factory. For the purpose of manufacture she purchased raw tobacco on which by virtue of section 5, item (viii), introduced by the impugned Amending Act she has paid tax at Re. 0-0-6 in the rupee. On her sales of cheroots she is liable to tax under section 5(vii) at the rate of Re. 0-0-6 per rupee. Of course she is entitled to the deduction of the purchase tax in calculating the net sales tax payable by her by reason of the proviso to section 5(viii) which we have extracted earlier. But her contention is that both the purchase tax levied and the sales tax demanded are illegal. Challenging the validity of these impositions she has invoked the jurisdiction of this Court under Article 226 of the Constitution to restrain the tax authorities from proceeding to levy or collect the tax from her. Mr. Bhashyam Aiyangar, learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffected in this scheme of taxation by the Central Excise and Salt Act, I of 1944, which consolidated and amended the law relating to central duties and excise on goods manufactured or produced in India. Section 3 of the Act which is the charging provision provides for the levy and collection of such duties as may be prescribed on all excisable goods produced or manufactured in India at the rates specified in the first schedule. Item No. 9 of the first schedule as originally enacted included "tobacco cured", tobacco being defined as "any form of tobacco cured or uncured, and whether manufactured or not" including the leaf, stalks and stems of the tobacco plant. Varying rates of duty were levied on different varieties of tobacco, virginia or country, and also on different types of curing to which the leaf was subjected and also on two manufactured products, cigars and cheroots. By an amendment effected in 1951 cured and uncured tobacco were both made liable to the duty as also cigarettes. Sections 6 and 8 of Act I of 1944 empowered the Central Government by notification to provide that as and from the dates specified no person shall except under the authority and in accordance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m tax a large number of varieties of these tobacco products. It would also be seen that raw tobacco whether cured or uncured though subject to the licensing provisions did not attract any duty on sales. The taxing, registration and licensing provisions of this enactment operated side by side with the provisions of the Central Excise Act I of 1944 and the taxation levied under it. It is unnecessary to consider the exact scope of the exemption in relation to tobacco under section 4 of the General Sales Tax Act, 1939, as it is common ground that until the impugned Act was enacted, no tax on the sale of these goods was levied except under the provisions first of Madras Act VIII of 1939 and later under Act IV of 1953. Next we have the impugned Madras Act XIII of 1955. By section 2(1) it altered the scope of the exemption granted by section 4 of the Madras General Sales Tax Act, 1939, whereby it became confined to taxed tobacco as defined in section 2(13) of the Madras Tobacco (Taxation of Sales and Registration) Act, IV of 1953. We have already set out the definition of taxed tobacco in the Madras Act IV of 1953 as it was when enacted. This included only cigars, cheroots, cigarettes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this entry and was not "a tax on the sale or purchase of goods" within Entry 54 of the State List. Learned counsel pointed out that side by side with the tax directed to be levied by the impugned Act was the excise duty payable on tobacco under the Central Excise Act, I of 1944. Under section 3 of the Excise Act tobacco, cured or uncured, manufactured or not, including the leaf, stalks and stem of the tobacco plant, was liable to excise duty at various rates per pound depending upon the quality and grade of the tobacco. The broad contention urged by Mr. Bhashyam Aiyangar was that the tax levied by the impugned enactment was merely an addition to the excise duty thus levied by the Central Excise Act, and that it was in substance a tax on production though in form it purported to be a tax on the sale of goods. In this connection learned counsel relied on passages in the judgment of the Federal Court in In re the Central Provinces and Berar Sales of Motor Spirit etc., Act(1). In particular he drew our attention to passages in the judgment which explained that the term excise considered in vacuo was one of wide and indefinite import and apt to include any internal and indirect duty w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., the miller. Provision was however made by rules framed under the act by which manufacturers became entitled to claim a rebate from the tax on the sale of the oil of the amount of tax paid at the point of the purchase of the nuts. A miller carrying on business in Vizianagaram challenged the validity of these taxing provisions and filed a suit for the recovery of the net sales tax paid by him, the contention being that the tax, though termed a sales tax, was really and in effect an excise duty. Several other subsidiary contentions were also raised, to which however there is no need to refer. The District Munsif of Vizianagaram decreed the suit and the appeal filed by the Province to the District Court was transferred to this Court for hearing. The appeal came on for hearing before Leach, C.J., and Chandrasekhara Aiyar, J., and the learned Judges dismissed it. It was contended on behalf of the Province that in a Constitution which vested a specific power to tax sales in Provinces, the expression "excise" must be so read as to exclude taxes on sales, and that in the context of these competing entries in the Government of India Act "excise" must be given the restricted meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away...........It is the fact of manufacture which attracts the duty, even though it may be collected later; and we may draw attention to the Sugar Excise Act in which it is specially provided that the duty is payable not only in respect of sugar which is issued from the factory but also in respect of sugar which is consumed within the factory. In the case of a sales tax, the liability to tax arises on the occasion of a sale, and a sale has no necessary connection with manufacture or production. The manufacturer or producer cannot of course sell his commodity unless he has first manufactured or produced it; but he is liable, if at all, to a sales tax because he sells and not because he manufactures or produces; and he would be free from liability if he chose to give away everything which came from his factory. In our opinion, the power of the Provincial Legislatures to levy a tax on the sale of goods extends to sales of every kind, whether first sales or not; and we regret that we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought from the growers. We must confess that we are unable to appreciate any force in this argument. A manufacturer who buys tobacco required by him from a dealer does not pay any tax because the tax levied is a single point tax and unless it is to be held that tax levied at a single point is obnoxious to Article 14 of the Constitution-a contention which has only to be stated to be rejected-we do not see any basis for an allegation of discrimination between several classes of manufacturers under the impugned enactment. Learned counsel for the petitioners in W.P. No. 118 of 1956 adopted the arguments of Mr. Bhashyam Aiyangar which we have already considered and urged in addition arguments challenging the validity of section 3(1-A) of the Madras General Sales Tax Act. It would be necessary to set out the provisions of this section which was introduced by the Madras General Sales Tax Act, VIII of 1955. This new section ran: "3. (1-A) The tax for each year may be assessed, levied and collected in advance during the year in monthly or quarterly instalments, and for that purpose a dealer may be required to furnish either an advance estimate of his turnover for the year, or periodical ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner in W.P. No. 118 of 1956 did not elect to send the monthly returns under rule 13 but had been assessed on the turnover which he estimated and which estimate was accepted by the assessing authority. The contention urged by Mr. Raghavachariar for the petitioner was that the provisional assessment thus levied upon his client was not in truth a tax on the sale of goods falling within Entry 54 of the State List but was a tax on an anticipated sale which was not within the legislative power of the State. We are clearly of the opinion that this contention is not well-founded. One thing is clear that if the anticipated sales do not take place, no tax liability is incurred. In other words, if at the end of the year the estimated turnover is not reached the dealer pays a tax only on the actual sales during the year. But this might not conclude the question of the existence or otherwise of the legislative power. It is not, in our opinion, correct to say that it is a tax on an anticipated sale. On the other hand, it is merely machinery employed for securing to the State the tax due and payable to it. It has to be remembered that the power confided to the State Legislature under Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to raise a substantial constitutional question': (Monamotor Oil Co. v. Johnson)292 U.S. 86; 78 L. Ed. 1141 (1148). The attack on rule 15(2) must accordingly fail." Learned counsel for the petitioner however pointed out that in Syed Mohamed's case[1952] 3 S.T.C. 367., the Court was concerned with the validity of a rule corresponding to rule 13 and not with a provision for assessment under rule 10. It was however clearly open to the assessee to elect to be assessed under rule 13, and if he considered it convenient to be assessed on an estimate which he himself furnished and which itself was an alternative to an assessment under rule 13, we do not see how he could complain about the validity of the tax. If the argument of learned counsel were accepted it would mean that in every case the provisional assessment should be on the basis of rule 13, which would certainly not improve the position of the petitioner who elected not to be governed by it. As we have stated before, the rules relating to provisional assessment are clearly within the legislative power of the State as providing the machinery for ensuring proper collection of the tax due under Entry 54 of the State List. The result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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