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TMI Blog1984 (7) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from 1st January, 1964, to 31st December, 1964, and Sales Tax Reference No. 6 of 1984 relates to period of assessment from 1st January, 1965, to 31st January, 1965. 3.. The assessees are a private limited company and are registered dealers under the Act. In the assessment proceedings the assessees had claimed deductions from total turnover certain sales of goods as being sales of goods in the course of import into the territory of India and as such not exigible to tax. The Sales Tax Officer accepted this claim of the assessees and allowed deduction of such transactions from total turnover on that count. The assessees, however, had collected tax on these sales. The Sales Tax Officer, therefore, passed orders under section 37 of the Act directing forfeiture of the said amounts recovered by the assessees from their customers, as being amounts by way of tax illegally collected by the assessees. The assessees preferred appeals before the Assistant Collector of Sales Tax. These appeals were dismissed. The assessees, therefore, preferred second appeals to the Sales Tax Tribunal. The Tribunal confirmed the view taken by the Sales Tax Officer that the amount collected by the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers conferred upon it by entries 54 and 64 in List II of Seventh Schedule to the Constitution of India and that under such powers the State Legislature could not validly enact a law which dealt with or related to a transaction which was not of a sale or purchase of goods in the State of Bombay. Since admittedly the transactions were in the course of import into the territory of India in respect of which the legislature had no power to enact a law, to construe section 37(1) as authorising the State Government to forfeit the amount of tax illegally collected by the dealer would render the provision unconstitutional as being beyond the competence of the State Legislature. He submitted that section 37(1) should be so construed as to render the provision constitutional. Reliance was placed also on article 286(1) of the Constitution which expressly takes away the power of the State Legislature to impose tax on sales in the course of import of goods into the territory of India, which position is also made expressly clear by the provisions contained in section 75 of the Act. In support of his submissions Mr. Patil relied on a decision of a Division Bench of this Court in Ramkrishan Kul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only be liable to pay a penalty, but also the sum collected by him by way of tax in contravention of section 46 was liable to be forfeited to the State Government. 7.. List II of the Seventh Schedule to the Constitution enumerates the matters in respect of which the legislature of any State has the power to make laws. Entries 54 and 64 in the said List II run as under: "54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. 64.. Offences against laws with respect to any of the matters in this List." List I in the Seventh Schedule enumerates the matters with respect to which the Parliament has the exclusive power to make laws. Entries 92, 92A, 93 and 97 of the said List I provide as under: "92. Taxes on the sale or purchase of newspapers and on advertisements published therein. 92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. 93.. Offences against laws with respect to any of the matters in this list. 97.. Any other matter not enumerated in List II or List III including any tax not mentioned in either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s into, or export of the goods out of, the territory of India. This constitutional prohibition is again emphasised in section 75 of the Act which runs thus: "75. Certain sales and purchases not to be liable to tax.-Nothing in this Act or the rules made thereunder shall be deemed to impose or authorise the imposition of a tax on any sale or purchase of any goods, where such sale or purchase takes place" (a)(i) outside the State; or (ii) in the course of import of the goods into the territory of India, or the export of the goods out of such territory; or (b) in the course of inter-State trade or commerce, and the provisions of this Act and the said Rules shall be read and construed accordingly. Explanation.-For the purpose of this section whether a sale or purchase takes place- (i) outside the State, or (ii) in the course of the import of the goods into the territory of India or export of the goods out of such territory, or (iii) in the course of inter-State trade or commerce, shall be determined in accordance with the principles specified in sections 3, 4 and 5 of the Central Sales Tax Act, 1956." 8.. On a consideration of the aforesaid and other provisions as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise of the legislative power under the said entries cannot be extended to matters not covered by these provisions. It has also been held in Kulwantrai's case [1979] 44 STC 117 that the State's power to legislate under entry 54 of List II in the Seventh Schedule to the Constitution does not extend to transactions which are not exigible to tax by the State under the said entry. Any attempt on the part of the State Legislature in the exercise of its legislative power under entries 54 and 64 to legislate with respect to a matter which does not fall within the field of sale or purchase of goods would be to exceed its legislative competence and would render the offending statutory provisions void. Therefore, a narrow interpretation should be placed upon the words used in the section in order to give the section on interpretation which would bring about its constitutional validity. In R. Abdul Quadar and Co. v. Sales Tax Officer, II Circle, Hyderabad [1964] 15 STC 403 (SC), which has been referred to and relied on in Kulwantrai's case [1979] 44 STC 117, section 11(2) of the Hyderabad General Sales Tax Act, 1950, was declared void by the Supreme Court on the ground that it did not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount by way of tax in excess of the tax payable by him, the provisions of section 37 of the Act must apply. In arriving at this conclusion, the learned Judge rejected the argument that, in view of section 75 of the Act, the provisions of section 37 could not be made applicable to the transactions in question. This view taken by the learned single Judge has been expressly disapproved by the Division Bench in Kulwantrai's case [1979] 44 STC 117 by making the following observations: "With respect to the learned Judge, we are unable to agree with the conclusion reached by him or the reasoning which led him to reach this conclusion. The learned Judge has not considered the scope of the incidental and ancillary powers of the State under the said entry 54 read with the said entry 64 of List II. The learned Judge has further overlooked that, under article 286 of the Constitution, no State has the power to impose a tax on the sales or purchases of goods, taking place in the course of the import of goods into, or the export of goods out of, the territory of India and that, if at all any legislative body could legislate with respect thereto, it is the Parliament. The learned Judge has furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , J., in C.R. Wood Co.'s case (Misc. Petition No. 667 of 1969 decided on 15th March, 1975-Bombay High Court) are obiter and were not necessary for deciding the reference in that case. It was further submitted that the view indicated by the Division Bench in the abovementioned observations being in the nature of obiter is not binding on us, and the department is entitled to reagitate the question over again before us. In order to appreciate this contention it would be useful to note the facts of that case and the question referred to this Court for determination. The assessees in that case were registered dealers carrying on business in iron and steel and in other goods. The assessee delivered a part of their stock of iron and steel to certain persons under the directions and orders issued to them by the Iron and Steel Controller. Apprehending that the sales tax authorities might contend that these transactions were transactions of sale of these goods to the persons to whom these goods were delivered as aforesaid, the assessees asked such persons to pay to them the amounts which they would be liable to pay by way of sales tax to the Government if the department were to hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment which relied on the two decisions of Bhatt, J., in support of their contentions before the Court in that case. 11.. It is further to be observed that both in Kulwantrai's case [1979] 44 STC 117 and the case before us, the scope and ambit of sections 46 and 47 of the Act is involved. The interpretation of these provisions necessarily require consideration of the scheme of the Act as well as the other provisions of the case. The interpretation of these provisions is again circumscribed by the prohibition contained in article 286 of the Constitution and the consideration of the relevant entries in the schedules to the Constitution. On principles there is no difference in a case where the amount by way of tax is calculated on a transaction which is not a sale and on a sale in respect of which the State Legislature has no power to impose a tax. The answer to both these aspects obviously depend on the interpretation of the same provisions of law. We are, therefore, unable to accept the contention of Mr. Jetly that the ratio of Kulwantrai's case [1979] 44 STC 117 has to be confined to a case where the dealer has collected amounts by way of tax on transactions which are not sales. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding article 286 of the Constitution while making a law under entry 54 of List II of the Seventh Schedule can, for purposes of the registration of a dealer and submission of returns of sales tax, include the transactions covered by article 286 of the Constitution. That being so, the constitutional validity of sub-section (1) of section 5 of the Act which provides for the classification of dealers whose gross turnover during a year exceeds Rs. 5 lakhs for the purpose of levy of surcharge, in addition to the tax payable by him, is not assailable. So long as sales in the course of inter-State trade and commerce or sales outside the State and sales in the course of import into, or export out of the territory of India are not taxed, there is nothing to prevent the State Legislature while making a law for the levy of a surcharge under entry 54 of List II of the Seventh Schedule to take into account the total turnover of the dealer within the State and provide, as has been done by sub-section (1) of section 5 of the Act, that if the gross turnover of such dealer exceeds Rs. 5 lakhs in a year, he shall, in addition to the tax, also pay a surcharge at such rate not exceeding 10 per centum o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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