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TMI Blog1957 (11) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... position of, a tax on the sale or purchase of any goods declared by this Act to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent." The date of the commencement of the Act was 9th August, 1952, being the date on which having received the assent of the President it was published in the Gazette of India. Item 10 of the list of goods set out in the schedule and which were declared "essential for the life of the community" to which the provisions of section 3 were attracted was "hides and skins." Under the rule-making power vested in them under section 3 and section 19 of the Madras General Sales Tax Act, 1939, the Government of Madras framed certain amendments to the Turnover and Assessment Rules amending the already existing ones relative to the imposition and levy of sales tax on hides and skins. These changes were effected by a notification in the official Gazette dated 3rd September, 1955, the rules being expressed to have retrospective effect from the beginning of the financial year 1955-56. The question that is raised in these petitions is whether these rules infringe the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such turnover. (4) For the purposes of this section and the other provisions of this Act, turnover shall be determined in accordance with such rules as may be prescribed. Provided that no such rules shall come into force unless they are approved by a resolution of the Legislative Assembly. (5) The taxes under sub-sections (1) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed." Sub-section (5) was followed by provisos which I omit as immaterial. The expression "dealer" was defined in section 2(b) to mean "any person who carries on the business of buying or selling goods." "Goods" were defined in section 2(c) to mean "all kinds of movable property other than actionable claims, stocks and shares and securities and includes all materials, commodities, and articles." This definition would therefore include hides and skins and if section 3(1) operated without any other qualification every dealer in hides and skins would have been liable to pay tax in respect of his transactions, that is on his turnover, subject to such rules as might be prescribed. In other words, if section 3(1) stood unqualified and had unrestricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the last dealer not exempt from taxation under section 3(3) who buys them in the State on the amount for which they were bought by him. (3) Sales by licensed dealers of hides or skins which have been tanned within the State shall be exempt from taxation provided that the hides or skins have been tanned in a tannery which has paid the tax leviable under the Act. If such hides or skins have been tanned in a tannery which is exempt from taxation under section 3(3), the sale of such hides or skins shall be liable to taxation as under the next sub-rule below dealing with hides or skins tanned outside the State. (4) Sales by licensed dealers in hides or skins which have been tanned outside the State shall be exempt from, taxation except at the stage of sale by the dealer who is the first dealer not exempt from taxation under section 3(3) who sells them within the State. The tax shall be levied from such dealer on the amount for which he sells such hides or skins. (5) Sale of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of section 3, be liable to taxation on each occasion of sale." The proper interpretation of these provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h they are bought by him. (2) (i) In the case of hides or skins which had been tanned outside the State, the tax under section 3(1) shall be levied from the dealer who in the State is the first dealer in such hides or skins not exempt from taxation under section 3(3) on the amount for which they are sold by him; (ii) In the case of tanned skins which have been tanned within the State, the tax under section 3(1) shall be levied from a person who is the first dealer in such hides or skins not exempt from taxation under section 3(3) on the amount for which they are sold by him: Provided that, if he proves that the tax has already been levied under sub-rule (1) on the untanned hides and skins out of which the tanned hides and skins had been produced, he shall not be so liable. (3) The burden of proving that a transaction is not liable to taxation under this rule shall be on the dealer." The contention urged by Mr. Nambiar in these petitions was that the amended rules 15 and 16 were "a law imposing or authorising the imposition of a tax" on the sale or purchase of goods-hides and skinsdeclared by Parliament to be essential to the life of the community under Act 52 of 1952. This thesis h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consideration. Before detailing or discussing the arguments of the learned Advocate-General, there is one matter I would like to refer to immediately. It was not disputed that subordinate legislation in the sense of a rule made under an enactment was a "law" within the opening words of Article 286(3) of the Constitution and section 3 of Act 52 of 1952. The learned Advocate-General however submitted that the words "imposing or authorising the imposition of" connected two distinct concepts. A law "imposed a tax" where it directly did so, that is proprio vigore. The expression "authorising the imposition of a tax", he said, would apply to cases where the Legislature vested another body with a power to make "a law imposing the tax." He instanced the cases of taxes imposed by municipal authorities under the provisions of the Municipal or Local Government Acts. In such cases the Legislature of the State which had power under the relevant entries of the State Legislative List to impose a tax authorised municipal authorities to levy certain designated taxes within their respective areas. There is no doubt that the AdvocateGeneral was right so far that the taxation permitted to municipali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate the opposing contentions. On behalf of the petitioners it was urged that it was by virtue of rules 15 and 16 that any transaction of purchase or sale of hides and skins was brought within the sphere of the charging provision of the Madras General Sales Tax Act and the new rules not having received the President's sanctions cannot have legal operation. If this contention were upheld it would mean that no sales tax could lawfully be levied on transactions in hides and skins from and after 1st April, 1955, because the earlier rules, which did not offend Article 286(3), were repealed and the new rules could not operate. On the other hand, the contention on behalf of the State was that "the law imposing sales tax" on transactions in hides and skins was the Madras General Sales Tax Act, 1939, a law which does not offend the provisions of Act 52 of 1952 and that the rules made under it including rules 15 and 16 were merely machinery provisions and not "laws imposing a tax". In this connection the learned Advocate-General submitted that in regard to a tax of the nature of a sales tax the essential constituent elements would be these: (1) the provision which determined the goods upon w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxing authorities to levy and assess the tax would be the later enactment and not the earlier one and therefore in that sense it would be the later law that would impose the tax. The theory which I just now mentioned could be sustained only by denying the fact of a repeal which is in terms expressed. For these reasons I consider this intermediate theory as illogical and unsound. This leaves for consideration the two opposite views put forward by learned counsel for the petitioners and for the State, either rules 15 and 16 of the Turnover and Assessment Rules is "a law imposing a tax" in which case there could be no tax levied on hides and skins or they are not a law imposing a tax in which case the entire provisions would be valid. The choice between them can be made only by ascertaining the precise connotation and import of the words "law imposing or authorising imposition of a tax" in Article 286(3) which are repeated in section 3 of Act 52 of 1952. What then is the import of the expression "law imposing a tax" or put in another way what is a law which imposes a tax or when can a law be said to "impose" tax? One thing is clear. It is not every law which has something to do w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of being amended by the Senate. It has been held on several occasions that the various Assessment Acts did not "impose taxation" and so held notwithstanding that such Acts contained provisions which brought into charge persons or transactions not normally within the scope of the Tax Acts, for the reason that the Assessment Act was ancillary to the Tax Act.In Osborne v. Commonwealth 12 C.L.R. 321., the question for the decision of the Court related to whether the Land Tax Assessment Act, 1910, was or was not "an Act imposing taxation" within the meaning of section 55 of the Constitution. Counsel seeking an affirmative answer pointed to sections 10 and 12 and certain other sections. Section 10 of the Act provided that land tax imposed by the relevant Tax Act should be levied and paid upon the unimproved value of the land but it also contained a provision that the rate of tax should be as declared by Parliament. Section 12 provided that land tax should be charged on land as owned at a particular time. There were other sections which stated that persons should be liable for land tax in certain specified cases and counsel relied on these also in support of the violation of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Constitution should receive a limited construction. A law dealing with taxation is therefore not necessarily a "law imposing taxation". To apply these decisions to the situation on hand, the position appears to me to be this: The Madras General Sales Tax Act is a "law imposing the tax". Under it the person who is liable to tax is the "dealer". The subject-matter of the tax is a transaction of sale or purchase of any commodity and the tax is laid on the total turnover of such dealer. The rate of tax is that laid down in the levy provision, section 3(1) and (2). The nature of the levy whether it is multiple point or at a single point is determined by the operation of section 5. The rest of the Act contain merely machinery provisions for the assessment and collection of tax. How the turnover is to be computed, which items of transactions shall be included or excluded in such computation, who shall compute it in the first instance and determine the tax payable, to whom appeals shall be preferred from such determination or decision, when the tax has to be paid as well as the machinery for collection including penalties for nonpayment are machinery provisions for the assessment and col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght into play. It cannot on this account be contended that the rules made under section 3(4) for computing the turnover is a law imposing the tax. Take again the case of rules framed under section 3(5) which enacts: "3(5) The taxes under sub-sections (1), (1A) and (2) shall be assessed, levied and collected in such manner and in such instalments, if any, as may be prescribed: Provided that (i) in respect of the same transaction of sale, the buyer or the seller, but not both, as determined by such rules as may be prescribed shall be taxed; (ii) where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause (i) of this proviso, he shall not be taxed again in respect of any sale of such goods effected by him." The rules framed under the first paragraph of the sub-section are undoubtedly merely machinery provisions and not laws imposing a tax in the sense I have described above. The first proviso enacts that the rules should lay down whether the seller or the buyer in respect of each transaction of sale should be liable to tax on his total turnover. The prescription in this regard cannot be dissociated and be held a law imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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