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TMI Blog1964 (2) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... mandamus restraining the Sales Tax Officer from enforcing the tax demand under the assessment order. The writ petition contains a number of grounds but two points only have been argued before me. The first point is that Notification No. S. T./117/X-293-1948 dated 8th June, 1948, specified that sales tax on cotton cloth and cotton yarn shall be levied only at the point of sale by the manufacturer. It was by reason of this specification in the said notification that sales tax was levied on the petitioner. The petitioner says that section 3-A as it stood on the date of the notification required the specification of the single point at which tax would be leviable by a rule made under the Act. The section itself may be quoted: "Notwithstanding anything contained in section 3, the State Government may, by notification in the official Gazette, declare that the turnover in respect of any goods or class of goods shall not be liable to tax except at such single point in the series of sales by successive dealers as may be prescribed. " It is true that because of the use of the words " as may be prescribed " the single point had to be determined by a rule made under the Act. It may, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has not done so. " It will at once be seen that one difference between the instant case and the case before the Full Bench is that in this case the power to issue a notification always existed even prior to the amending Act of 1952. In the Full Bench case the power to issue notification did not exist before the amending Act came into force and the notification there was issued prior to power being conferred on the State Government for issue of notification. Here the case is not one of the doing of something, the power to do which did not exist at the time when the thing was done. Here all that happened is that the specification of the single point which had to be made by a rule was not done in that mode. It follows that the present case is not one of something having been done, the power to do which did not exist but only of something having been done the power to do which existed, but which was not done in the manner or mode in which it should have been done. By the subsequent amendment the requirement as to the particular mode of doing the thing was done away with and it was further laid down that it will be deemed in law that the requirement in that behalf never existed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a[1959] 10 S.T.C. 432., the nature of the power under section 3-A has been held to be as follows: " Under section 3-A only an accessory or subordinate power has been conferred on the State Government to select the commodities and the object of the conferment of the power was to carry the purpose and policy of the Sales Tax Act." In this view the provisions of the amending Act No. 40 of 1952 are not hit by the provisions of Article 286(3) of the Constitution. Therefore, the second point urged by the learned counsel must also be overruled. The result is that the writ petition fails and is dismissed with costs." The petitioner appealed and the matter came before Mukerji and Jagdish Sahai, JJ. The learned Judges thought that the decision of the Full Bench in Firm Bangali Mal Satish Chandra Jain v. Sales Tax Officer, Agra(1) required reconsideration and hence these appeals were laid before the present Full Bench. P. L. Naithani and S. C. Khare, for the appellants. The Standing Counsel, for the respondent. JUDGMENT DESAI, C.J.-This is an appeal from a judgment of Brijlal Gupta, J., dismissing the appellants' petition for certiorari to quash the assessment orders under the U.P. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 3-A the Governor had declared that proceeds of sale of cotton yarn and cotton cloth manufactured by mills in U.P. would be subject to sales tax at the point of sale by the manufacturer and at the rate of six pies per rupee. The notification was published in the official Gazette. The State Government did not make any rules under section 24 prescribing that proceeds of sale of these goods would be taxed at the point of sale by the manufacturer. It could issue a notification that proceeds of sale of certain goods would not be taxed except at such single point in the series of sales as may be prescribed and also specify the rate of tax, but it could prescribe the single point in the series of sales by a rule and not by a notification. Its prescribing the single point in the series of sales, namely, the sale by the manufacturer by a notification, was, therefore, null and void. If the prescribing of the single point was null and void, specifying the rate became ineffective. This was realised by the Legislature and by section 4 of Act No. 40 of 1952 it amended section 3-A. Section 4 is to the effect that in section 3-A " for the words 'as may be prescribed' the words 'as the State Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, therefore, void and that after the dissolution of the partnership no assessment could validly be made on it. In the associated Special Appeal No. 488 also the appellant is a manufacturer of, and dealer in, cotton cloth and yarn and was registered under section 8-A of the Sales Tax Act. It was assessed for the year 1955-56 to tax of Rs. 8,000 and odd and a demand notice was issued by the Sales Tax Officer. It applied for certiorari for the quashing of the assessment order and the demand notice and for mandamus calling upon the Sales Tax Officer to refrain from enforcing his assessment order and demand notice. It contended that the Notification No. S. T. 117/X was ineffective and that Act No. 40 of 1952 not having received the President's assent could not be enforced. The two petitions came up for hearing before Brijlal Gupta, J., who dismissed both. He held that Act No. 40 of 1952 by section 4 validated the notification, that the decision in Firm Bangali Mal Satish Chandra Jain v. Sales Tax Officer(1) was to be distinguished, that section 3-A is not a law imposing or authorising the imposition of sales tax, section 3 being the charging section, that consequently Act No. 40 of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notification". The definition of "prescribed" is to be adopted "unless there is anything repugnant in the subject or context": see section 2. Giving the word "prescribed" the meaning giving in the definition would be repugnant to the context and has to be avoided. Even if it be said that the word "prescribed" used in section 3-A meant "prescribed by rules", the only consequence would be that the notification in so far as it specified the particular single point for assessability was ineffective and not to render the whole notification ineffective. As far as the declaration minus the specification of the particular single point was concerned it was valid because it had to be made by a notification. Whatever might have been the invalidity in respect of the specification of the particular single point, it was removed by the retrospective effect given to the amendment of section 3-A by Act No. 40 of 1952. Had the words "as the State Government may specify" been used in the original section 3-A instead of the words "as may be prescribed" there would have been no flaw at all in the notification because it could not then be urged that the specification could not be done by a notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d section did not actually exist. The evident object behind the retrospective effect given to the amended section was to validate all acts which would have been valid if the amended section had existed when they were done but would have been invalid in its absence. If the notification would have been valid if the amended section had existed in fact on 8th June, 1948, it must be held to be valid because it is deemed to have existed then. Of course if it would have been invalid even if it had existed in fact then it is not rendered valid by the legal fiction because the effect of the legal fiction cannot be greater than what it would have been had the fiction been a fact. If on 8th June, 1948, section 3-A used the words "as the State Government may specify" instead of the words "as may be prescribed" the notification would have been fully in order because, as I said earlier, the particular single point could be specified in it. It follows, therefore, that the effect of the legal fiction is to validate the notification even if it had been invalid because of the particular single point not being prescribed by a rule. It is true, as pointed out by Mootham, C.J., in the case of Firm Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d but it is open to the Legislature to declare that a power that has been exercised was created before it was exercised. If the power is declared to be deemed to exist before it was exercised it validates the exercise. Here the Legislature through the legal fiction contained in section 4 of Act 40 of 1952 created the power to specify the particular single point by notification with effect from 1st April, 1948, i.e., the date on which the Sales Tax Act came into force. There is no occasion for applying the principle that a power which purports to have been exercised under a particular provision under which it could not legally be exercised cannot be sustained on the ground that it could be exercised under another provision. If a power purports to have been exercised under an authority under which it could be validly exercised, a legal fiction creating another power with retrospective effect may not validate the exercise of the power merely because it could have been exercised under it but the specification of the particular single point in the notification does not fall within this principle because it was contained in a notification expressly issued under the authority of section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made or tax levied or action or proceeding taken for realisation of tax can be valid unless the notification is valid. I am not sure that the notification itself is within the scope of section 8. Issuing it is certainly not exercising a jurisdiction. The word "jurisdiction" is not used in regard to exercise of an administrative power. It might be said that issuing a notification containing the declaration referred to in section 3-A is taking an action under section 3-A. Sri Khare contended that "action" within the meaning of section 8 is a legal action and that it is used as a synonym of "proceeding". Issuing a notification as permitted by section 3-A may not be said to be taking an action under it and in that case there would be nothing in section 8 to apply to a notification. It is, however, not necessary for me to decide definitely that it is or is not action taken under section 3-A because even if it is not action taken under section 3-A the leal fiction incorporated in section 4 is sufficient to render the notification valid. Moreover, section 8 does not apply to action not taken in accordance with the provisions of the unamended section 3-A. If the word "prescribed" in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the object behind the retrospective effect was to validate the notification and I do not agree with their observation that it was not achieved by merely giving retrospective effect to it and could not be achieved without express words. The notification was issued in exercise of a supposed power which did not exist on 31st March, 1956, and the defect of the non-existence of the power was removed by the legal fiction. The Supreme Court noticed this decision in the case J. K. Jute Mills Company Ltd.[1961] 12 S.T.C. 429; A.I.R. 1961 S.C. 1534. but did not overrule it because it was not called upon to do so. It is enough for our purpose that it did not approve of it. The observation of Venkatarama Ayyar, J., at page 1537 with respect to Amendment Act No. 24 of 1957 that "if the State thought that this legislation would give a quietus to the controversy, they were sadly mistaken" suggests that the decision did not find full favour with the Supreme Court. We were referred to Maxwell on Interpretation of Statutes, 11th Edition, pages 205 and 213, and Craies on Statute Law, page 389. Maxwell deals with construction of statutes at pages 205 and 213. There is no question of construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Government may specify" for the words "as may be prescribed" in section 3-A which had been added in the Sales Tax Act by Act No. 15 of 1948 and was, therefore, not hit by section 3 of the Essential Goods Act No. 52 of 1952. Act No. 40 of 1952 did not proprio vigore impose or authorize the imposition of any tax; it simply altered the method by which the State Government could publish the single point selected for taxability. Even section 3-A itself does not impose or authorize the imposition of a tax; on the other hand, it exempts the turnover of certain goods at certain points from taxability. Section 3-A(2) authorizes the State Government to vary the rate at which tax may be assessed in respect of the notified goods but it was not affected by any provision of Act No. 40 of 1952. In Firm of A. Gowrishankar v. Sales Tax Officer [1958] 9 S.T.C. 407; A.I.R. 1958 S.C. 883., the Supreme Court held that a State Sales Tax Act enacted before the Essential Goods Act No. 52 of 1952 is not affected by Article 286(3). Validity of a State law imposing sales tax cannot be challenged on the ground that it was not reserved for the consideration of the President and had not receive his assent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the first point the contention was that under the terms of subsection (1) of section 3-A of the principal Act the notification aforesaid could not have been validly issued unless the State Government had first framed a rule prescribing the single point in the series of sales by successive dealers at which tax was to be levied, and that subsection (2) of section 3-A by which the rate of tax was to be specified would come into operation only after action had been taken under sub-section (1) of that section. Section 3-A, so far as material, runs as follows: "3-A. Single point taxation-(1) Notwithstanding anything contained in section 3, the State Government may by notification in the official Gazette declare that the turnover in respect of any goods or class of goods shall not be liable to tax except at such single point in the series of sales by successive dealers as may be prescribed. (2) If the State Government makes a declaration under subsection (1), it may further declare that the turnover in respect of such goods shall be liable to tax at such rate not exceeding 7 nP. per rupee as may be specified. (3)..........." Section 2(f) of the principal Act defines "prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re dispensed with the requirement of framing a rule for prescribing the point at which tax was to be levied. By making the amendment retrospective in its operation the object of the Legislature was to import a fiction that there never existed the necessity of prescribing the single point by making a rule. The question which was debated and which needs consideration is: when the Legislature creates or constructs a legal fiction by virtue of such words as "deemed to be" how far is that fiction to be operative? In R. v. Norfolk County Council [1891] 60 L.J.Q.B. 380., Cave, J., observed: "Generally speaking, when you talk of a thing being deemed to be something, you do not mean to say that it is that which it is to be deemed to be. It is rather an admission that it is not what it is deemed to be and that notwithstanding it is not that particular thing, nevertheless. . . . . it is deemed to be that thing." The same principle has been enunciated in Ex parte Walton: In re Levy[1881] L.R. 17 Ch. D. 746., where James, L. J. said: " When a statute creates that something should be deemed to have been done, which in fact and truth was not done, the Court is entitled and bound to ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-A(2) into one issued under the new section. The conferment of the necessary power from a back date cannot, in other words, have the effect of validating a notification which was not issued in exercise of that power." In the case of Firm Bangali Mal Satish Chandra(1) the power to issue a notification did not exist before the Amendment Act came into force. The State Government had not issued the notification in that case in exercise of any power conferred under the Act and, therefore, it could be said that the act done by the State Government was not authorised by law. In the instant case the power to issue a notification was always there and all that had happened was that the declaration as to the point at which tax was to be assessed was made without framing a rule. By virtue of the Amendment Act the State Government was empowered to issue a notification specifying the point at which tax was to be levied. Such notification had already been issued in 1948 and the Amendment Act provided that all acts done under the principal Act shall be deemed to have been done in exercise of the power conferred under the new Act. Thus the action taken by the State Government in issuing the notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given effect to. Those who framed the U. P. Sales Tax (Amendment) Act (40 of 1952) must have been well aware that a notification had already been issued specifying the point at which tax was to be assessed. The purpose behind the amendment was to express the manifest intention of the Legislature so as to validate all acts done under the principal Act as though they had been done under the amending Act. I am, therefore, of opinion that the State Government had power to issue the impugned notification and by virtue of the legal fiction contained in section 4 of the 1952 Act the specification of the single point by the impugned notification was valid and binding with effect from the 8th June, 1948. In Hazarimal Kuthiala v. The Income-tax Officer [1961] 41 I.T.R. 12 (S.C.); A.I.R. 1961 S.C. 200., Hidayatullah, J., delivering the judgment of the Court pointed out that: "The exercise of a power will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it will be nugatory." The necessary corollaries of the legal fiction introduced by section 4 of the amending Act were that even if the impugned notification had not been validly issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the U.P. Sales Tax (Amendment) Act, 1952, is that you must deem that the Notification of 8th June, 1948, was valid when issued. I should like, however, to add a few words respecting the contention that the amendment brought about in section 3-A(1) of the principal Act contravenes the provisions of Article 286(3) of the Constitution. In my opinion, Article 286(3) does not come into play at all as the amendment did not impose, or authorise the imposition of, tax but it merely altered the method by which the State Government could indicate the single point selected for taxability. The power to determine the single point continued to vest in the State Government. That was in no way altered. The exercise of that power, resulting in the determination of the single point, would precede or be simultaneous with the publication of that determination. But the two processes are distinct in quality and nature, and it is only the mode of publicly expressing that determination which has been altered by the amendment. The question may also be looked at from another aspect. Section 3-A(1) is not a provision which creates liability to tax. That liability is created by section 3. By virtue of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly true, as observed in the case of Firm Bangali Mal Satish Chandra [1958] 9 S.T.C. 492; 1958 A.L.J. 228. , that there is a difference between a power and the exercise of that power; but it seems to me to be equally true that it is only when a power can manifest itself in effective acts done in exercise of it that it can be said to be real power, and that a power devoid of that capacity is no power at all in the reckoning of law. If, therefore, by a legal fiction a power is deemed to have retrospectively existed, all such acts done during its "fictional" existence as may be supported by that power will stand retrospectively validated. Indeed validation of acts of the above description can be the only object of giving retrospectivity to the power, for otherwise, it is not possible to comprehend the purpose and utility of a provision that the power will always be deemed to have existed. I, therefore, find myself unable to accept the correctness of the view taken in the case of Firm Bangali Mal Satish Chandra [1958] 9 S.T.C. 492; 1958 A.L.J. 228. that the conferment of the necessary power from a back date cannot have the effect of validating a notification which was not issued i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which it finds place, it must be held to include the issue of a notification. As to the question whether, in order to attract the operation of section 8 of the amending Act, it is necessary that the notification should have been issued under and in accordance with the provisions of section 3-A of the Act as originally enacted, I think that at no point of time can the legality of the provision be tested with reference to section 3-A in its original form because at no point of time section 3-A can be regarded as having been in any form other than the one given to it by the amending Act. I feel driven to this conclusion by the force of the statutory fiction embodied in section 4 of the amending Act. It had the effect of wiping off the old shape of section 3-A and giving it a new one retrospectively. As such, the requirements of section 3-A as originally framed are not there at any point of time for being fulfilled by the notification and it could only conform to the requirements of section 3-A as modified. The contrary view would, in my opinion, curtail the full retrospectivity of section 4 of the Act and nullify to some extent its "deeming" provision. Further, section 8 of the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deral Commissioner of Taxation66 C.L.R. 198., and Cadbury Fry Pascall Proprietary Limited v. The Federal Commissioner of Taxation70 C.L.R. 362. In all these cases the matter for consideration was the meaning and scope of the expression "imposing taxation" and "imposition of taxation" used respectively in sections 53 and 55 of the Commonwealth of Australia Act, 1900, and they appear to me, therefore, of great instructive value in the interpretation of the words "imposing or authorizing the imposition of a tax" in Article 286(3) of our Constitution. The principle deducible from the above cases is that imposition is the levy as distinguished from the management, assessment, collection and control of the tax, the latter being "only the legal machinery by which the obligation declared by the imposition is effectuated." The imposition of sales tax had been done by section 3 of the Act and section 3-A is really in the nature of an exception empowering conversion of multiple point taxation into single point taxation in regard to the goods and under the conditions mentioned therein. The amendment in question therefore did not obviously amount to a law imposing or authorizing the imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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