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TMI Blog1959 (10) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid for the issue of a writ under Article 226 of the Constitution to direct the respondent to forbear from enforcing the rules, after declaring them illegal. The case for the appellants is that rules 15 and 16 of the Turnover and Assessment Rules. which were published on 7th September, 1955, were invalid, as being contrary to the provisions of Article 286(3) of the Constitution before the amendment. The Madras General Sales Tax Act, 1939, authorises the State to impose a tax on the sale of goods. Under section 3 of the Act, the tax is levied on an annual turnover of a dealer, which comprises the sale or in certain cases the purchase price of the goods. The tax being leviable on the occasion of a sale of a particular article, there could, on the terms of that provision, be as many levies as there were sales of that commodity within the State of Madras, resulting in multi-point levy on the same article. The Act provided exemptions and reductions in certain cases. Dealers, having an annual turnover of less than Rs. 10,000 were exempted. Certain goods, for example, hand-woven clothes were totally exempted. In regard to certain others, the multi-point levy was avoided by a scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax without the approval of the President. But, before its provisions could be made applicable, the Parliament should have declared, by law, the concerned commodity as essential for the life of the community. In such a case, no State could legislate so as to impose a sales tax on such commodity, unless the bill was reserved for consideration of the President and received his assent. There was such a legislation by the Parliament. The Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, LII of 1952, was enacted, and came into force on 8th August, 1952. In the Schedule to the enactment, which specified the goods which were declared essential for the life of the community, time 10 related to hides and skins. Section 3 of Act LII of 1952 provided that no law of a State, which imposed or authorised the imposition of a sales tax on goods declared as essential goods under that enactment, would be valid, unless it had been reserved for consideration by the President and received his assent. On the dates when the impugned rules were made and notified, Act LII of 1952 was in force, though later it was repealed. That latter circumstance, however, is of no moment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the appellants, contended that the Turnover and Assessment Rules relating to the tax on hides and skins were really taxing provisions, and not mere machinery ones. He further contended that the interpretation of the words " a law imposing tax", adopted in the decisions of the Australian Courts, was the result of a political practice adopted in that country, and could not property guide the interpretation of Article 286(3) of the Constitution, and that further the rules, having been made a part of the Act by section 19 thereof, should be deemed to be a law imposing a sales tax by the State Legislature. The precise nature of the old rule 16 was considered in several decisions of this Court. Those considerations would also apply to the new rules. In Syed Mohamed and Co. v. State of Madras[1952] 3 S.T.C. 367., it was held that sections 5 and 6 did not, by themselves, impose a tax on the purchaser in the case of the sale of hides and skins but left it to the rule-making authority to determine at which point, in the series of sales by successive dealers, tax should be levied. In Hajee Abdul Shukoor and Co. v. State of Madras[1955] 6 S.T.C. 352 (F.B.)., dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the tax relates to the sale of hides and skins. The last is provided for by rule 16 of the Turnover and Assessment Rules. The rule determines in respect of which and by whom is the fixed point tax to be paid. Liability would, therefore, accrue only if the point has been fixed. As in a sales tax the occasion or event is an important constituent element to attract tax liability, the specification of the point should be construed as part of the charging provision, and not a mere machinery one. But for that specification, there would be no liability at all of the dealer to pay the tax. Rule 16 should, therefore, be considered, as the old rule 16 was considered an integral part of the charging provisions. It would, therefore, be part of the law imposing a tax. On the question as to the precise meaning to be attributed to the words "law imposing taxation" in the Constitution, the learned Judge referred to three decisions of the Australian Courts: Osborne v. Commonwealth12 C.L.R. 321., Federal Commissioner of Taxation v. Munro38 C.L.R. 153., and Cadbury Fry Fascall Proprietary Ltd. v. The Federal Commissioner of Taxation 70 C.L.R. 362. Those cases make a distinction between a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efine within narrow limits the laws imposing taxation in respect of which alone the latter body would have controvert legislative powers. That was achieved by restricting the laws imposing a tax to the barest limits, and dealing with other matters relating to taxation by a separate enactment, so that the Senate would have full legislative powers over them. They were called Assessment Acts, while the former was called the Taxing Act. Thus, a constitutional practice grew in that country for separating Taxation Act from Assessment Acts. In Cadbury Fry Fascall Proprietary Ltd. v. Federal Commissioner of Taxation70 C.L.R. 362 at p. 373., Latham, C.J., observed at page 373: "Parliamentary practice has given effect to these provisions by distinguishing between Tax Assessment Acts and Tax Acts in the manner stated. Acts of the former type provide means for assessing and collecting tax-they give authority to officers to assess and collect the tax, and they impose duties upon persons to make returns in order to make such assessment and collection possible. The Tax Acts contain the grant of money-they impose the burden upon the people. It is the latter Acts and not the former which have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f certain taxes; customs duties imposed by the executive government by a notification. A law levying taxes may, thus, be in absolutely complete form, or it may be in a form which needs some further provision or further action to make it complete or operative. In such cases, it would properly be a law authorising imposition of tax, because the exigibility of tax would depend upon further provisions being made. Such an enactment would be one authorising the imposition of a tax, not one itself imposing tax. The Madras General Sales Tax Act, 1939, is of a composite character. It could be a law imposing the tax in regard to the sale of most of the commodities. By reason of our conclusion, that in the case of hides and skins (and goods similarly placed by section 5), the relevant Turnover and Assessment Rules would also be the charging provision, the Act should be held to be merely one authorising the imposition of a tax in regard to such goods. But both types of legislation would be covered by Article 286(3) of the Constitution. If, therefore, after the passing of Act LII of 1952, sales tax legislation was enacted in regard to the commodities declared by the former Act, it would require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shankar v. Sales Tax Officer, Secunderabad[1958] 9 S.T.C. 407., it was held that Article 286(3) contemplated a law passed by the State after the Parliamentary law declared the goods as essential commodities. The law so passed could therefore only be a statute law and not any subordinate legislation. A similar question arose under Article 305 of the Constitution in Kutti Keya v. State of MadrasA.I.R. 1954 Mad. 621., where the question was whether the notification, which extended the provisions of the Madras Commercial Crops Markets Act (Act XX of 1933) to certain places after the Constitution came into force, contravened Articles 302 and 304(a). It was held that the Madras Commercial Crops Markets Act would be an "existing" law, as it was passed before the Constitution by an authority competent to enact it, and the fact, that its operation had not been extended before the coming into force of the Constitution, would not be material for the purpose of the definition. In Surajmal v. State of RajasthanA.I.R. 1954 Raj. 260, 263., rules and by-laws were framed by the municipality, imposing octroi duty after the Constitution under the Jaipur Municipal Act, which was passed prior to the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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