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TMI Blog1978 (7) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... e General Sales Tax Act, 1125, in respect of the assessment year 1957-58. By the decision of this Court in Malayalam Plantations Limited v. State of Kerala[1963] 14 S.T.C. 969., it was held that the company was not liable to sales tax in respect of tea stored in the godowns of Willingdon Island and sold in Fort Cochin, which was part of the Madras State till 1st November, 1956, and was governed by the Madras General Sales Tax Act till 1st October, 1957. That was because, it was an "outside sale" under article 286 of the Constitution and, therefore, not liable to be assessed under the State law. The same was held to be the position in respect of the company's sales of tea stored in Willingdon Island and sold at Calicut. Exhibit P2 is a copy of the judgment. After exhibit P2, the revised assessment exhibit P3 followed on 21st March, 1966, with a refund voucher exhibit P4. Thereafter, the State of Kerala passed the Madras General Sales Tax (Revival and Special Provisions) Act, 1971-the impugned Act, referred to, where necessary, as the Revival Act-a copy of the same has been marked as exhibit P5. Notice followed under the Act and objections were filed, after which exhibit P10 assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices. 4.. The arguments advanced in these writ petitions were that the Act in question was beyond the legislative competence of the Kerala State Legislature; that even assuming that it was within the legislative competence of the State, the assessment and the demand for tax for the period from 1st April, 1957, to 30th September, 1957, were invalid (this was the argument specifically advanced in O.P. No. 2391 of 1973); and that the Act is discriminatory, as, prior to 1st November, 1956, the dealers in the Madras State are marked off into two categories, one selling their tea produced in Nilgiris in Cochin and getting the benefit of section 5(v) of the Madras General Sales Tax Act, and the other selling their tea after stocking them in Willingdon Island and selling them in auction at Fort Cochin, the latter not being entitled to the benefits of section 5, clause (v), of the Madras Act, by reason of the provisions of the impugned Act. A special point was raised in O.P. No. 2391 of 1973 that the petitioner was not a "dealer" at all and only a dealer was liable to pay sales tax. It was argued that he was only selling goods produced by him and, as such, he cannot be made liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of sales to which this Act applies." The revival of the Madras Act was thus subject to substantial modification. 6.. We shall first deal with the argument of the legislative competence. It is well-settled by the decisions of the Supreme Court that the legislative competence must be judged with reference to the time of the passing of the legislation and not with respect to the time at which the legislative provision is to take effect, or to have operation. In A. Hajee Abdul Shukoor and Company v. State of Madras[1964] 15 S.T.C. 719 (S.C.); [1964] 8 S.C.R. 217., it was observed: "The only question that now remains for consideration is whether the State Legislature was competent to enact the provision of sub-section (1) of section 2 of the Act. Hides and skins had been declared under Act 52 of 1952 to be essential for the life of the community. Article 286(3) of the Constitution, as it stood before its amendment by the Constitution (Sixth Amendment) Act of 1956, on 11th September, 1956, read: 'No law made by the legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Schedule to the Act. It was because textiles became declared goods from April 1, 1958, that the Mysore Legislature lost its power to tax the sales of textiles at a rate higher than that specified in section 15 of the Central Sales Tax Act, as it stood at the relevant time. Though the goods on the sale of which tax was imposed remained the same in substance, their legal quality became different. As textiles were not declared goods before April 1, 1958, there was no inhibition on the part of the Mysore Legislature in subjecting the turnover of sales of textiles before that period to a tax higher than that specified in section 15 of the Central Sales Tax Act. 21.. The matter can be looked at from a different angle. As we have already indicated, by virtue of section 5(5) of Act No. 9 of 1964, the substituted subsection (5A) was deemed to have been in the Mysore General Sales Tax Act always. The only limit on the power of a legislature to create a fiction is that it should not transcend its power by its creation. The limitation on the power of the Legislature of Mysore in 1964, when it enacted Act No. 9 of 1964, was that on the sale of declared goods it could not have imposed sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the territories within that State immediately before the appointed day. 120.. For the purpose of facilitating the application of any law in relation to any of the States formed or territorially altered by the provisions of Part II, the appropriate Government may, before the expiration of one year from the appointed day, by order make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered, repealed or amended by a competent legislature or other competent authority. Explanation.-In this section, the expression 'appropriate Government' means- (a) as respects any law relating to a matter enumerated in the Union List, the Central Government; and (b) as respects any other law,- (i) in its application to a Part A State, the State Government, and (ii) in its application to a Part C State, the Central Government." It was pointed out that the power under section 119 is only a limited power to continue the provisions of the Madras General Sales Tax Act till it is repealed by a competent legislature. This, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect only from 1st October, 1957, that section itself enables the authorities to levy tax for the period commencing from 1st April, 1951, to 30th September, 1957, and there was thus power to assess such transactions. That such legislation, affecting past transactions, so to say, retrospectively, is possible, has been recognised by the Supreme Court in many decisions. See for instance M.P.V. Sundararamier and Co. v. State of Andhra Pradesh[1958] 9 S.T.C. 298 (S.C.); A.I.R. 1958 S.C. 468. , Mt. Jadao Bahuji v. Municipal Committee, KhandwaA.I.R. 1961 S.C. 1486. , and Government of Andhra Pradesh v. Hindustan Machine Tools Ltd.A.I.R. 1975 S.C. 2037. In view of the provisions of section 3, there is no force in the contention of the counsel for the petitioners in O.P. No. 2391 of 1973 that the turnover from 1st April, 1957, to 30th September, 1957, is not, in any event, assessable. 10.. Counsel for the petitioner in O.P. No. 3243 of 1973 strongly relied on the decision of the Full Bench of this Court in Ananthanarayana Iyer v. Agricultural Income-tax and Sales Tax Officer1958 K.L.T. 1144 (F.B.). There, the Travancore-Cochin Agricultural Income-tax Act (22 of 1950) was amended by Act 8 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessarily limited to persons, property or business within the jurisdiction and further it is only such tax as could have been authorised originally that could be levied retrospectively. Finally, it may be possible to accept the suggestion of the learned Advocate-General that the Act is prospective and not retrospective in its operation. See Queen v. St. Mary Whitechapel[1848] 12 Q.B. 120 at 127; 116 E.R. 811 at 814., where it was observed that 'a statute is not properly called retrospective because a part of the requisites for its action is drawn from time antecedent to its passing'. But however viewed, whether as operating retrospectively or prospectively, the Act as made operative from 1st April, 1957, purports to levy for the first assessment year under it tax on income which is foreign both as derived and as received. This certainly is overstepping the limits of extra-territoriality and retrospectivity as understood above and the tax must to that extent be bad. The American case referred to by the learned Advocate-General is in the context not of much help. That was anyhow a case of inheritance taxes which are said to be excise taxes and involve also certain peculiarit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d auction the same in Cochin, he does not enjoy the benefits of section 5(v) of the Act. Assuming, without examining, whether the position is really so, we do not think this can constitute discrimination. The difference in result is based essentially on the constitutional provision in article 286 of the Constitution and its practical application to the transactions in question. In State of Madhya Pradesh v. Bhopal Sugar Industries Ltd.[1964] 52 I.T.R. 443 (S.C.); [1964] 6 S.C.R. 846., the court observed: "It would be impossible to lay down any definite time-limit within which the State had to make necessary adjustments so as to effectuate the equality clause of the Constitution. That initially there was a valid geographical classification of regions in the same State justifying unequal laws when the State was formed must be accepted. But whether the continuance of unequal laws by itself sustained the plea of unlawful discrimination in view of changed circumstances could only be ascertained after a full and thorough enquiry into the continuance of the grounds on which the inequality could rationally be founded, and the change of circumstances, if any, which obliterated the compulsi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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