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TMI Blog1970 (11) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... 64, on a net turnover of Rs. 2,77,618.21 out of which the turnover of meals and coffee worked out to Rs. 2,73,996.96. The Deputy Commercial Tax Officer assessed the turnover of meals and coffee splitting it up into two parts: (1) Rs. 93,113.23 up to 31st July, 1963, at 3 per cent. applying the old provision; and (2) up to the limit of Rs. 39,999 at 2 per cent. and the balance of Rs. 1,40,884.73 at 3 per cent. from 1st August, 1963 to 31st March, 1964, applying the substituted provision. Against the order splitting up the turnover into two parts and applying two different rates of tax in respect of the total turnover, the assessee preferred an appeal unsuccessfully to the Assistant Commissioner of Commercial Taxes, Kakinada. Thereafter, a further appeal was preferred to the Sales Tax Appellate Tribunal and the Tribunal, holding that the amendment, which came into effect on 1st August, 1963, is prospective, gave relief in accordance with the rates prescribed in the amended proviso. It is this order that is assailed before us by the revision petitioner, the State of Andhra Pradesh. In order to judge whether the assessing authority can invoke the old proviso up to 31st July, 1963, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riods. The learned Principal Government Pleader has also invited our attention to the decision in State of Bombay v. United Motors (India) Ltd.[1953] 4 S.T.C. 133 at 156 (S.C.). which was relied upon by the Supreme Court in State of Jammu and Kashmir v. Caltex (India) Ltd.[1966] 17 S.T.C. 612 (S.C.). We may here quote what Patanjali Sastri, C.J., observed in United Motors case(1): "In the present case the tax is imposed, in ultimate analysis, on receipts from individual sales or purchases of goods effected during the accounting period, and it is therefore possible to separate at the assessment the receipts derived from exempted sales or purchases and allow the State to enforce the statute with respect to the constitutionally taxable subjects, it being assumed that the State intends naturally to keep what it could lawfully Printed at page 415 infra. tax, even where it purports to authorise the taxation of what is constitutionally exempt." Their Lordships in that case were considering the vires of rule 5(2)(i) made under the Bombay Sales Tax Act, 1952. It was held that rule 5(2)(i), which provided that in order to claim deduction for the sales covered by clauses (1)(b) and (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue that the substituted provision came into effect on 1st August, 1963; but by mere reason of the fact that the substituted provision came into effect on 1st August, 1963, the State cannot split up or separate the turnover so as to levy tax at different rates on the turnover prior to 31st July, 1963, and subsequent to that date. The proviso does not, in our opinion, admit of such splitting up the turnover "for the year" into two parts. The rates of tax provided in the proviso are "for the year" and, therefore, in our view, there is no warrant for importing something which is not there in the proviso so as to empower the assessing authorities to split the turnover into two parts and levy the sales tax at different rates. To a similar effect is the view expressed by Hidayatullah, J. (as he then was) speaking for the majority in Mathra Parshad and Sons v. State of Punjab(1). Although their Lordships were dealing with the case of exemption, the principle enunciated by them equally applies to the levy of tax. The material portion of their Lordships' observations may be quoted with advantage: "that as the tax under the Act was yearly and was to be paid on the taxable turnover o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., where it was held that the assessment could be split up and dissected and the items of sale could be separated and taxed for different periods, was based on the facts of that case where the Petrol Taxation Officer assessed the dealer to pay sales tax for the period January, 1955, to May, 1959, on the petrol supplied pursuant to a contract between the DirectorGeneral of Supplies, Delhi, and the dealer. The price of petrol so supplied was paid to the dealer at Delhi by the Director-General of Supplies. In that case, two questions arose for determination: (1) Whether sales tax could be imposed on the dealer for the period from October, 1955, to May, 1959, in view of the prohibition contained in article 286(2) of the Constitution as it stood before its amendment; and (2) whether sales tax could be validly levied on sales taking place between 1st January, 1955, to 6th September, 1955, in view of the provisions of the Sales Tax Laws Validation Act, 1956 (Act 7 of 1956). On the first question, it was held that section 3 of the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act applied to the transactions of sale of petrol made by the dealer during the period from 1st January, 1955, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -64 on 30th June, 1964, on a net turnover of Rs. 2,77,618.21 out of which the turnover of coffee and meals worked out to Rs. 2,73,996.96. The Deputy Commercial Tax Officer assessed the turnover at the following rates: Turnover up to 31st July, 1963: Rs. 93,113.23 at 3 per cent. Turnover from 1st August, 1963, to 31st March, 1964: (a) up to the limit of Rs. 39,999.00 at 2 per cent., (b) balance thereafter, Rs. 1,40,884.73 at 3 per cent., the total turnover being Rs. 2,73,996.96. Subsequently the Deputy Commercial Tax Officer himself found that the respondents were originally assessed at a lower rate. He, therefore, revised the assessment and assessed the entire turnover at 3 per cent. as the turnover up to 31st July, 1963, exceeded Rs. 25,000 and the turnover after 1st August, 1963, exceeded Rs. 40,000. Against the said revised assessment, the respondents preferred Appeal No. 168 of 1965-66 before the Assistant Commissioner of Commercial Taxes, Kakinada. The appeal related to the rate of tax on the turnover of Rs. 39,999. The Assistant Commissioner dismissed the appeal. On a further appeal to the Sales Tax Appellate Tribunal, the Tribunal by its order dated 23rd September, 1966, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , boarding house, restaurant, stall or any other place, the tax shall be calculated at the rate of three naye paise in the rupee if the total turnover relating to those articles is not less than Rs. 25,000." A comparative study of both these provisions would indicate that prior to its amendment, in respect of the turnover relating to articles of food or drink sold in a hotel the tax was to be calculated at the rate of 3 naye paise in the rupee in a case where the turnover was not less than Rs. 25,000. After its amendment two changes have been brought about. Firstly, the limit of the turnover is raised from Rs. 25,000 to Rs 40,000; and, secondly, the tax on the first Rs. 39,999 is levied at the rate of two paise in the rupee, and at the rate of 3 paise in the rupee on the balance of the turnover. The result of the amendment is that a concession is given to the hotels inasmuch as the tax on the first Rs. 39,999 is reduced to two paise in the rupee which if it was above Rs. 25,000 was taxed at 3 paise in the rupee. It is, therefore, natural that the assessees should make an attempt to bring their cases under the amended proviso rather than allow more tax to be collected under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retroactivity. They may be retroactive if the Legislature clearly so intends. Otherwise, even the taxing statute is prospective in its operation unless as stated above the language employed clearly indicated its retrospective operation. The question, however, is whether the same rule of interpretation applies to a case where the original Act or a section is amended and re-enacted in part and amended and substituted in the other part. The rule in that behalf, in our view, cannot be different. Provisions of the original Act or section which are repeated in the body of the amendment, either in the same or equivalent words, are considered a continuation of the original law. This rule of interpretation is applicable even though the original Act or section is expressly declared to be repealed. Nevertheless the provisions of the original Act or section re-enacted by the amendment are held to have been the law since they were first enacted, and the provisions introduced by the amendment are considered to have been enacted at the time the amendment took effect. Thus rights and liabilities accrued or incurred under the provisions of the original Act, which are re-enacted, are not affect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find no scope for any such contention. It was, however, contended that the new proviso uses the words "for the year" and since assessment is made at the end of the assessment year, the provisions of the new proviso would apply to the whole year because it is that provision of law which was in force at that time. What is, however, overlooked in advancing this argument is that the change which has been brought about in the rates and in the manner of their application are substantive rights and liabilities which are accrued or incurred. The moment the transactions are completed, under the Act rights are accrued and they are not affected by the amended proviso. If the unaffected transactions have already attracted particular rates of tax and the manner in which those rates are to be made applicable, then if the new proviso is to be applied which involve new rates and a new manner of applying them, it will affect the vested rights and liabilities which the Legislature never intended to affect. Nothing could have prevented the Legislature by introducing some words which would have given the substituted proviso a retrospective operation. When the proviso directs the making of an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of such a quantified tax are the three distinct stages of the sales tax scheme. Whereas the first, i.e., imposition is automatically attracted the moment a certain limit of turnover is crossed, the other two aspects which mainly relate to procedural part are attracted subsequently and only in a case where the first element exists. What must necessarily follow is that the words "for the year" or the fact that the assessment is made on the total turnover for the year does not alter the position of law in regard to the operation of the charging section as we have indicated above. We are, therefore, not satisfied that the words "for the year" or the words "total turnover for the year" make the substituted proviso applicable even to the transactions completed prior to 1st August, 1963. It was then contended that the total turnover for the year cannot be split into two or more parts. The reason for such an argument is that the substituted proviso states that the assessment has to be made on the total turnover for the year. That is normally so if the substantive rights. and liabilities have not undergone any change in-between because of certain amendments in regard to rates at which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax would be 3 per cent. on the turnover of the transactions which were completed subsequent to the amendment and that is how the assessing authority has calculated it and, in our view, rightly. That also would amount to applying the new provisions to all the transactions completed after the amended proviso came into force. The contention, however, was that in regard to the quantification of the tax relating to the second period, the first Rs. 39,999 of that period must be taxed at 2 per cent. according to the new proviso. We do not think such a calculation can be made in the present case. The first Rs. 39,999 as per the new proviso does not mean the first Rs. 39,999 of the transactions completed after the amended proviso. It means the first Rs. 39,999 of the assessment year. Since the first Rs. 39,999 would have been already taxed under the old proviso, it would not be proper to tax them again though at a lesser rate. It is impossible not to tax them in the first half because if this amount is taxed under the second half, the assessee will get some concession because of the lesser rate involved. As the total turnover of the year exceeded Rs. 25,000, whatever may be the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Sales Tax v. Modi Sugar Mills Limited[1961] 12 S.T.C. 182 (S.C.). In Commissioner of Sales Tax v. Bijli Cotton Mills[1964] 15 S.T.C. 656 (S.C.). S.C. 306 at 311., the Supreme Court observed: "A Tribunal called upon to decide a taxing dispute must apply the relevant law applicable to a particular transaction to which the problem relates, and that law normally is the law applicable as on the date on which the transaction in dispute has taken place. If the law which the Tribunal seeks to apply to the dispute is amended, so as to make the law applicable to the transaction in dispute, it would be bound to decide the question in the light of the law so amended. Similarly when the question has been referred to the High Court and in the meanwhile the law has been amended with retroactive operation, it would be the duty of the High Court to apply the law so amended if it applies." In State of Jammu and Kashmir v. Caltex (India) Limited[1966] 17 S.T.C. 612 (S.C.)., the Supreme Court held: "that though there was one order of assessment for the period January 1, 1955, to May, 1959, the assessment could be split up and dissected and the items of sale could be separated and taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held: "If the tax is yearly and is to be paid on the taxable turnover of a dealer, then the exemption, whenever it comes in, in the year for which the tax is payable, would exempt sales of those goods throughout the year..... " In this context it is relevant to note that Kapur, J., who wrote a dissenting judgment, noted the argument advanced: "The argument was that it was a yearly tax on the turnover and not that every year a tax was to be levied on the taxable turnover, i.e., aggregate of the sales made during a given period." This contention was rejected by the learned Judge in the following observation: "I am unable to agree that the effect of the collocation of the words in section 5 and particularly of the words 'shall be levied on the taxable turnover every year...a tax' is what was argued by the appellants, i.e., it was a yearly tax like the income-tax. " It will immediately be plain that the said decision has no bearing whatsoever on the question which we are considering. Firstly, because the scheme of the Act in that case was different. There the tax was a yearly tax. In the present case as we have observed the tax is immediately imposed the moment the taxable e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover of Rs. 25,531.85 is at a flat rate of only 2 naye paise per rupee on the application of the amending proviso to section 5(1) of the Andhra Pradesh General Sales Tax Act (hereinafter called the Act). The brief and material facts that gave rise to this case, which lie in a short compass, may be stated thus: The Assistant Commercial Tax Officer, Masulipatnam, by his order dated 27th March, 1965, determined the net turnover of the respondent herein, the proprietor of Amba Bhavan Meals and Coffee Hotel, Machilipatnam, in respect of articles of food and drink sold in his hotel for consumption for the year 1963-64 at Rs. 27,531.85 by adding Rs. 2,000 to the gross turnover as per accounts, for the alleged defects found by him in the accounts of the dealer. On the application of the proviso to section 5(1) of the Act prior to the amending Act 16 of 1963 which came into force on 1st August, 1963, the assessing authority taxed the turnover of Rs. 8,651.12 for the period from 1st April, 1963, to 31st July, 1963, at 3 per cent. and the remaining turnover of Rs. 18,880.73 at 2 per cent. The appeal by the dealer to the Commercial Tax Officer was unsuccessful. On further appeal by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration." Registered dealer is a dealer registered under section 12 of the Act. Casual trader is a person who has occasional transactions of business of buying, selling, supplying or distributing goods in the State for consideration in his capacity as a principal, agent or in any other capacity. Section 5 is the main charging section which specifies the persons who are liable for tax and also provides for the mode of taxation. Every dealer whose turnover is over and above Rs. 10,000 per year, is liable to pay sales tax at the rate of 2 naye paise on each rupee of the turnover. Dealers whose turnover is less than Rs. 10,000 are not liable to pay sales tax. But all casual traders and agents of non-resident dealers and those who trade in goods specified in Schedule II or Schedule III are liable to pay sales tax at the rate of 2 naye paise on every rupee of their turnover irrespective of their total turnover in any year. The proviso to section 5(1) prior to amendment reads thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of 2 naye paise on every rupee of the turnover. By sub-section (2)(a) of section 5, a single point sales tax is leviable at the point of first sale within the State on the turnover of a dealer in respect of the goods mentioned in the First Schedule at the rates specified therein in addition to the tax which he has to pay under sub-section (1) irrespective of the quantum of turnover. A single point sales tax only at the point of first sale in the State is exigible under section 5(2)(b) on the turnover of sales of a dealer in each year relating to the goods specified in Schedule II at the rate or rates specified therein, irrespective of the quantum of turnover. Section 5-A provides for the levy of additional sales tax on the turnover of the dealer at the rate of onefourth naya paisa on every rupee, if the total turnover for the year is rupees three lakhs or more. Notwithstanding anything contained in section 5, section 6 imposes sales tax on the sales or purchases of declared goods defined under section 2(f) at the rate and only at the point of sale or purchase specified against each in the Third Schedule, irrespective of the quantum of his turnover in such goods. The proviso to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led law that any amending provision to a taxing statute is only prospective unless the contrary intention is made known from the clear language of the amendment. A reading of section 5 of Act No. 16 of 1963 would show that the amendment to the proviso to section 5(1) of the Act is not retrospective as there are no specific words to that effect. Hence, we have no hesitation to hold that it is only prospective but not retrospective and is applicable to the sales made by the respondent on or after 1st August, 1963, when it came into force. However, it is next to be seen as to whether the amended proviso to section 5(1) which came into force during the course of the year with effect from 1st August, 1963, has any impact on the sales made by the respondent for the period commencing from 1st April, 1963, to 31st July, 1963, in view of the alteration in the rate of tax prescribed by the amended proviso. Both the counsel, stating that there is no direct case on the question at issue, relied, in support of their respective pleas, upon certain observations of the Supreme Court in the following cases which we shall presently consider. Strong reliance has been placed by Sri Dasaratharama R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement of the exemption. This decision of the Supreme Court does not render any assistance to the dealer in the present case, but, on the other hand, it supports the plea of the State as the amending proviso to section 5(1) has come into force only from 1st August, 1963, and it has no retrospective effect. In Commissioner of Sales Tax v. Modi Sugar Mills Ltd.[1961] 12 S.T.C. 182 (S.C.)., the Supreme Court, while considering the applicability of the enhanced rate of sales tax from 3 paise to 6 paise per rupee as per the notification which came into force on 8th June, 1948, held that an assessee who elected the previous year as the basis of his assessment in the assessment year 1948-49, was liable to be assessed only at the flat rate of 3 paise per rupee on the whole of the turnover of the previous year and the notification was not applicable. The following observations of Shah, J., at page 189 have a material bearing on the question before us: "In the case of a dealer who adopts the turnover of the year of assessment for purposes of taxation, the application of the notification altering the rate of tax and the incidence of tax does not present any difficulty. The notification e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing authorities were entitled to levy sales tax in respect of sales that took place during the period from 1st January, 1955, to 6th September, 1955. Ramaswami, J., who spoke for the court rules thus at page 623: "It is true that there was one order of assessment for the period from January 1, 1955, to May, 1959, but the assessment can be easily split up and dissected and the items of sales can be separated and taxed for different periods...... ...... sales tax is imposed, in ultimate analysis, on receipts from individual sales or purchases of goods effected during the entire period and it is possible to separate the assessment of the receipts derived from the sales for the period from January 1, 1955, to September 6, 1955, and to allow the taxing authorities to enforce the statute with respect to the sales taking place in this period and also prevent them by grant of a writ from imposing the tax with regard to sales for the exempted period. In other words, the assessment for the period from January 1, 1955, to September 6, 1955, can be separated and dissected from the assessment of the rest of the period and the High Court was in error in holding that the assessment for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective effect by the time the matter in dispute was before the Tribunal or the High Court, the law that should be applicable to these transactions in dispute must be the law which has been made applicable by retrospective legislation but not the original law. Though the order of assessment made by the assessing authority in respect of any year for the sales of any dealer is one, the period of assessment can certainly be split into two or more periods if the rate of tax is made applicable differently for different periods, although sales tax is an annual tax. From the aforesaid discussion, the following principles emerge: (1) The law that normally is applicable to decide a dispute under the Act is the relevant law which is in force and applicable as on the date on which the transaction of sale or purchase, to which the problem relates, has taken place. (2) Where the existing tax law has been altered in the course of the year by a subsequent enactment or notification made by the State Government with retrospective effect either from the commencement of the year or from any specified date, it is the amended law but not the original law that should be applicable to the sales or pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the rest of the period are exempt or are not to be taxed in any given case. (9) Where the existing law has been altered during the course of the year changing the rate of tax leviable on the sales or purchases of particular goods prospectively the assessing authorities are justified in splitting the year of assessment into two periods for the purpose of assessment applying the original rate to the turnover of sales or purchases of such goods f or the first period and the altered rate for the latter period. On the application of the principles referred to above to the facts of the present case, we must hold that the year of assessment 1963-64 has rightly been divided by the assessing authority into two periods, the dividing line being the date when the amended proviso to section 5(1) came into force, and the finding of the Sales Tax Appellate Tribunal that there was no justification for splitting the year of assessment into two periods and making the amended proviso applicable for the entire turnover of the year as it was less than Rs. 39,999 is erroneous and illegal. Hence, in the circumstances, the turnover of Rs. 8,151.12 in respect of the sales made by the respondent for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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