9911796707
TMI Blog1971 (12) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ority should modify the assessment orders from 1959-60 to 1964-65 and reduce the rate of tax to the rate mentioned in section 3 of the U.P. Sales Tax Act. In Writ Petition No. 3848 of 1970 the petitioner has been assessed to sales tax on its turnover of the sale of bricks for the assessment years 1965-66 to 1969-70. Its appeals are still pending. In Writ Petition No. 5875 of 1971 the petitioner has been assessed to sales tax on its turnover of the sale of bricks for the assessment years 1961-62 to 1968-69. The assessments in all these petitions are challenged. It is now necessary to give the history of the present litigation. It is a history of long drawn battle between the State and the brick producers. As the Sales Tax Act emerged from the legislative anvil in 1948, it had only one charging section. It was section 3. Section 3 imposed sales tax on the sale of goods which were being sold at more than one point as well as goods which were sold only at one point. Section 3-A was inserted in the Sales Tax Act sometime later in 1948. Sub-section (1) of section 3-A provided for the levy of sales tax on the sale of any goods "at such single point in the series of sales by successive d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not be liable to tax except at such single point of sale as the State Government may specify and such declaration may be made notwithstanding that the goods or class of goods are not capable of being sold or according to the prevalent commercial practice are not ordinarily sold at more than one Point." (emphasis added). The Legislature also validated the assessment orders made and the tax collected under the previous notifications. The validity of the 1970 Amendment Act was also challenged in this court in Krishna Brick Field v. State of U.P.[1972] 29 S.T.C. 15; 1971 A.L.J. 919. A Full Bench of this court held that part of section 3-A(I) which has been underlined by me is unconstitutional inasmuch as it delegates essential legislative power to the State Government and is violative of the provisions of article 14 of the Constitution. After the decision of the Full Bench, the Legislature again intervened and passed the U.P. Sales Tax (Amendment and Validation) Act, 1971 (No. 20 of 1971). By this Amending Act the Legislature has substituted sections 3 and 3-A of the existing Sales Tax Act and has added section 3-AB. It is now necessary to set out the material portion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the third column thereof at such rate, not exceeding ten per cent., as the State Government may, by notification in the Gazette, declare: Provided that the rates prevailing, by virtue of section 3-AB, immediately before the commencement of the U.P. Sales Tax (Amendment and Validation) Act, 1971, shall continue in force until altered by any such notification ..... (2) The turnover in respect of all goods, which are not specified in the First Schedule or in section 3-AA or in the notification under section 3-D, shall be liable to tax at the rate of 3 per cent." Section 3-AB materially reads: "(1) Notwithstanding any judgment, decree or order of any court, any tax imposed, assessed, levied or collected, or purporting to have been imposed, assessed, levied or collected before the commencement of the U.P. Sales Tax (Amendment and Validation) Act, 1971, under any of the notifications specified in the Second Schedule shall be deemed to have been validly imposed, assessed, levied or collected in accordance with law, as if the said notifications had been included in and formed part of this section and this section had been in force at all material times when such tax was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, decree or order in any court, all cesses imposed, assessed or collected or purporting to have been imposed, assessed or collected under any State Act before the commencement of this Act shall be deemed to have been validly imposed, assessed or collected in accordance with law, as if the provisions of the State Acts and of all notifications, orders and rules issued or made thereunder, in so far as such provisions relate to the imposition, assessment and collection of such cess had been included in and formed part of this section and this section had been in force at all material times when such cess was imposed, assessed or collected." One of the contentions of the learned counsel for the appellant was that section 3(1), in fact and in substance, had validated the invalid State statute which Parliament could not do. Dealing with the contention, Sri Gajendragadkar, C.J., said: "The plain meaning of section 3 is that the material and relevant provisions of the State Act as well as the provisions of notifications, orders and rules issued or made thereunder are included in section 3 and shall be deemed to have been included at all material times in it. In other words. what secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the first defect is removed by section 3-AB. In my view, the second defect is also removed. Accordingly, the Legislature cannot be accused of intrusion into judicial domain. Section 3-AB makes no sense and is inefficacious.-The next argument of Sri Raja Ram Agarwal is that as the notifications issued under the old section 3-A had been bodily lifted into section 3-AB, it makes no sense and is inefficacious. The phrase "bodily lifted" is taken from Collector of Customs v. Sampathu Chetty[1962] 3 S.C.R. 786. There, pointing out the distinction between a mere reference to or citation of one statute in another statute and legislation by reference, the Supreme Court said that legislation by reference "in effect means the bodily lifting of the provision of one enactment and making it part of another". It was held that the statute in that case fell within the first class and not within the second class. Section 3-AB falls within the second class undoubtedly. It is an instance of legislation by reference. Sri Raja Ram Agarwal has laid particular emphasis on certain words in the notifications specified in the Second Schedule. Those words are: "In the exercise of his powers under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected". Section 3-AB also saves imposition of taxes by the notifications which have already been declared to be invalid: it also saves assessment, levy and collection of taxes under them under the cover of the phrase "purporting to have been imposed, assessed, levied and collected". In a nutshell, section 3-AB seeks to protect (1) imposition of taxes, (2) assessment of taxes, (3) levy of taxes, and (4) collection of taxes under the notifications specified in the Second Schedule. It seems to me that the argument proceeds from overlooking the significance of the word "levy" in section 3-AB. The Legislature should be presumed to have used the word "levy" in a sense different from "imposition", "assessment" and "collection" of taxes. The word "levy" means "any step taken or any proceeding initiated for the ultimate purpose of determining the liability of the assessee. (See Dialdas Parmanand v. P.S. Talwalhar[1956] 7 S.T.C. 675; A.I.R. 1957 Bom. 71. So that "taxes levied" in section 3-AB would mean any step taken or any proceeding initiated for determining the tax payable by an assessee. The phrase "taxes levied" will save whatever inchoate steps or proceedings have already been taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said section, anything in this proviso as to the minimum amount of turnover notwithstanding; or (b) he is registered under the Central Sales Tax Act, 1956, and has furnished a declaration under sub-section (4) of section 8 of the aforesaid Act, in which case he shall be liable to pay tax on his sale of any goods in respect of the purchase of which he has furnished the aforesaid declaration notwithstanding anything contained in this proviso as to the minimum amount of turnover: Provided also that the State Government may, by notification in the Official Gazette, enhance the rate of the tax on the turnover in respect of any goods or class of goods so, however, that the rate does not exceed 3 paise per rupee and may, likewise, reduce it, and the tax shall thereupon be payable on the relative turnover at the enhanced or reduced rate as may be applicable: Provided further that where the amount notified under the first proviso is reduced during an assessment year, the tax payable as aforesaid by a dealer shall be computed as follows: that is to say- (a) on the turnover relatable to the period previous to the reduction as though the amount has not been reduced, and (b) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 3-AB. We are concerned with bricks in these cases. This court has held that no notification concerning bricks could be issued under the old section 3-A. In the result, while existing side by side with the old section 3-A, section 3-AB would exclusively deal with bricks. Section 3-AB and the old section 3-A do not overlap with respect to bricks. There will accordingly be no discrimination in the case of bricks. I am unable to appreciate the argument that as the old section 3-A and section 3-AB would exist together, the decision of the Full Bench in Krishna Brick Field[1972] 29 S.T.C. 15; 1971 A.L.J. 919. is binding on us on the question of article 14. The Full Bench considered the old section 3-A in the context of the exercise of power of imposing tax by a delegated authority. Under section 3-AB, the Legislature itself has legislated on the imposition of tax on the sale of bricks. Another line of argument is that there is no reasonable basis in section 3-AB for different rates of taxes for different kinds of goods. In Raja Jagannath Baksh Singh v. State of U.P.[1962] 46 I.T.R. 169 (S.C.); [1968] 1 S.C.R. 220., it was said: "There is no doubt that it is for the Legislature t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of policy; so the legislature possesses the largest measure of discretion in tax matters. If selection is based on a reason, it is sufficient even though in the opinion of the court the reason is a poor one. The test is good faith and not wisdom." At page 423 it is said that the differences in organisation, management and the type of business transacted are sometimes sufficient to justify the classification. These guide-lines will be helpful in examining the argument. The Second Schedule to the Amending Act, 1971, specifies a large number of notifications dealing with a large number of goods. It specifies a notification concerning timber. The rate of tax on timber is 6 per cent. It also specifies bricks, cement and cement water-proofing compound. The rate of tax on the sale of these goods is 7 per cent. It also specifies sanitary goods, fittings excluding pipes and fittings, taxable at 8 per cent. Iron and steel are also specified. They are taxable at 3 per cent. at the point of sale by the dealer to the consumer. It should be observed that all building materials except iron and steel are taxed at a higher rate than other goods. Iron and steel are taxed at 3 per cent. beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des that no person shall burn bricks with coal except as provided in the Uttar Pradesh Coal Control Order, 1955. In view of the Uttar Pradesh Bricks Control Order and the Uttar Pradesh Coal Control Order, the Government knows for definite the names of the brick-producers and the places where they produce bricks. As their names and places of business are already known, it is easier to collect tax from them than from a large mass of unknown dealers. Tax may be collected with greater administrative convenience and less cost of collection. The Legislature may reasonably take into consideration administrative convenience and cost of collection in fixing a higher rate of tax on the sale of bricks. For the reasons already discussed, I am of opinion that the Legislature is not defying the command of equal protection in demanding higher rate of tax on the sale of bricks than on the sale of certain other goods. Another argument proceeds in this way. The notifications specified in the Second Schedule deal with two kinds of goods: (1) goods which are salable at more than one point; (2) bricks which are salable at only one point. It is said that by and large the scheme of the Second Schedule st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that section 3-AB is retrospective in operation. It is said that retrospectivity of the provision infringes article 19(1)(f) and (g) of the Constitution. It may be recalled that under the old section 3-A, the State Government had issued several notifications imposing a higher rate of tax on the sale of bricks by the producers. All those notifications have been struck down by this court for one fault or the other. In the meanwhile, the State Government had assessed and collected taxes on the sale of bricks. A huge amount of tax had been collected till the date of the commencement of the Amending Act, 1971. The Legislature accordingly felt it necessary to enact section 3-AB to save the Government from a critical financial predicament. In similar circumstances the Supreme Court has upheld the retrospectivity of the statute. (See Tata Iron and Steel Co. Ltd. v. State of Bihar[1958] 9 S.T.C. 267 (S.C.); [1958] S.C.R. 1355., Rai Ramkrishna v. State of Bihar[1963] 50 I.T.R. 171 (S.C.); A.I.R. 1963 S.C. 1667. and Jaora Sugar Mills v. State of M.P.[1966] 1 S.C.R. 523. Repugnancy of section 3-AB to the old section 3.A.-I have already discussed earlier that as regards bricks, section 3- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, are an exception. They do not pass through multiple sales. They could not be the subject-matter of higher tax under section 3-A. Can they be subjected to higher tax under section 3-AB? In taxing the turnover of bricks at a single point, no administrative convenience is involved, because there is only one point of sale. The tax can be collected from the manufacturer as well under sub-section (2) of section 3-A as under section 3-AB. There are no middlemen involved. The higher rate of tax cannot be said to afford relief to the consumer. What then is the basis upon which bricks should be subjected to a higher tax? No reason has been disclosed in the counter-affidavit filed on behalf of the State. The reasons put forward at the time of the hearing are all farfetched and I would not venture a guess of my own. The only reason which might have prompted the Legislature to fix a higher rate for bricks can be that the consumer of bricks is a person belonging to a well to do class of society and can bear a greater burden of tax. If that be the reason, it would indeed be a poor reason. But when the Legislature makes a classification, it cannot be struck down on the ground that the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
