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TMI Blog1986 (1) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute. In State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC); AIR 1972 SC 1131, the Supreme Court held that "there was no sale when food or drinks were supplied to guests residing in a hotel and pointed out that the supply of meals was essentially in the nature of a service provided to them and could not be identified as a transaction of sale". Following that principle it was reiterated in the subsequent decision in Northern India Caterers v. Lt. Governor of Delhi [1978] 42 STC 386 (SC); AIR 1978 SC 1591: "..............if that be true in respect of hotels, a similar approach seems to be called for on principle in the case of restaurants................... The classical legal view being that a number of services are concomitantly provided by way of hospitality, the supply of meals must be regarded as ministering to a bodily want or to the satisfaction of a human need In the result, we hold that the service of meals to visitors in the restaurant of the appellant is not taxable............" The review petition filed in that case was dismissed by the Supreme Court observing [in Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Tax Officer, Andhra Pradesh [1981] 47 STC 104 the State Government preferred an appeal and it is stated that the same is still pending in the Supreme Court. While so, the Parliament enacted the Constitution (Forty-sixth Amendment) Act, 1982, which came into force on 2nd February, 1983. Under section 4 of that Act clause (29A) was inserted in article 366 of the Constitution and it reads as follows: "(29A) 'tax on the sale or purchase of goods' includes ........................ (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made." Section 6 of the Amendment Act which deals with validation and exemption is as follows: "6. (1) For the purposes of every provision of the Constitution in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made, by any restaurant or eating house (by whatever name called), at any time on or after the 7th day of September, 1978, and before the commencement of this Act and the aforesaid tax has not been collected on such supply on the ground that no such tax could have been levied or collected at that time; or (b) where such supply, not being any such supply by any restaurant or eating house (by whatever name called), has been made at any time on or after the 4th day of January, 1972, and before the commencement of this Act and the aforesaid tax has not been collected on such supply on the ground that no such tax could have been levied or collected at that time: Provided that the burden of proving that the aforesaid tax was not collected on any supply of the nature referred to in clause (a) or, as the case may be, clause (b), shall be on the person claiming the exemption under this sub-section. (3) For the removal of doubts, it is hereby declared that, (a) nothing in sub-section (1) shall be construed as preventing any person- (i) from questioning in accordance with the provisions of any law referred to in that sub-section, the assessment, reassessment, levy or collection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 261 regarding the validity of transactions already made as follows: "On a close reading of section 6 and the marginal note, we are clearly of the opinion that the section is only intended to validate transactions already made and levy and collection of tax on transactions by way of sale of foodstuffs and beverages..........." However, regarding the imposition and collection of tax in future, i.e., after 2nd February, 1983, it was held that section 6 of the Amendment Act did not authorise the taxing authorities to levy and collect tax on the foodstuffs and beverages supplied by way of service in hotels, restaurants and eating houses and such a levy and collection after 2nd February, 1983, could be done only by the amendment of the State law. Therefore, the provisional assessment orders for the year 1983-84 were quashed. In that decision, it was categorically held that sections 4 and 6 were not ultra vires article 368 and were not violative of articles 14, 19(1)(g) and 21 of the Constitution of India. Aggrieved by that decision to the extent it was against them, some of the petitioners preferred appeals in the Supreme Court. While they were pending, the State Government p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 930 (Central Act III of 1930), the sale of goods includes the supply, by way of or as part of any service or in any manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration and such supply of any goods shall be deemed to be a sale of those goods by the person making the supply of those goods to the person to whom such supply is made." "Section 2. (s) 'turnover' means- (i)...................... (ii)..................... (iii)(d) the aggregate of amounts charged under section 5C or realisable under section 5E: ..........................." 'Section 2(q) 'tax' means a tax on the sale or purchase of goods payable under this Act and includes,- (i)..................... (ii)..................... (iii).................... (iv).................... (v).................... (vi) a tax on the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y action or thing taken or done in relation to such assessment (whether provisional or final), reassessment, levy, or collection under the provisions of the principal Act which imposed or authorised the imposition of or purporting to impose or authorise the imposition of, a tax on the supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) for cash, deferred payment or other valuable consideration, before the 2nd February, 1983, shall be deemed to be as valid and effective as if such assessment (whether provisional or final), reassessment, levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act and accordingly: (a) all acts, proceedings, or things done or taken by the Government or by any officer of the Government or by other authority in connection with the assessment (whether provisional or final), reassessment, levy or collection of such tax shall for all purposes, be deemed to be, and to have always been done or taken in accordance with law; .......................... (3) Notwithstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consolidate and amend the laws relating to the levy of a general tax on the sale or purchase of goods. Marginal note of section 5 reads: "Levy of tax on sales or purchases of goods" and under that section every dealer except those that are mentioned thereunder is liable to pay tax on his turnover. Whereas the learned Advocate-General has strongly relied on the decision in Shree Sajjan Mills Ltd. v. Commissioner of Income-tax (1985) 4 SCC 590 in support of his contention that the marginal note or heading is certainly a relevant factor to be taken into consideration in construing the ambit of the section, the learned counsel for the petitioners, Sri Nariman has stressed, on the basis of the earlier decision of the Supreme Court in Board of Muslim Wakfs, Rajasthan v. Radha Kishan AIR 1979 SC 289 that the marginal note appended to a section cannot be used for construing the section. Under clause (a) of sub-section (2) of that section a dealer is entitled to levy tax in the case of goods mentioned in the First Schedule at the point of sale and under clause (b) of sub-section (2) he is entitled to levy tax on the goods mentioned in the Second Schedule at the point of purchase. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 6 provided that for the purpose of every provision of the Constitution in which the expression "tax on the sale or purchase of goods" and for the purpose of any law made or purporting to have been made in pursuance of such expression, it shall be deemed to include a tax on the supply. Under clause (b) of sub-section (1) of section 6 every transaction by way of supply or as part of any service or in any other manner whatsoever of food or drink was deemed to be a transaction by way of sale. It was further provided thereunder that all the taxes levied or collected or purporting to have been levied or collected under the law before the commencement of the Constitution (Forty-sixth Amendment) Act shall be deemed always to have been validly collected in accordance with law. The provisions of sections 4 and 6 were construed by this Court in Hotel Dwaraka's case [1985] 58 STC 241. It was observed at page 250: "What is sought to be achieved by the Constitution (Forty-sixth Amendment) Act is to remove the causes for ineffectiveness or invalidity and the effect of the judgment of the Supreme Court in Northern India Caterers' case [1978] 42 STC 386 (SC); AIR 1978 SC 1591. It is clear fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Constitution (Forty-sixth Amendment) Act, 1982. Equally, we are unable to accept the contention of Sri Nariman, the learned counsel for the petitioners, that Parliament does not have the power to make the law validating the State laws in the exercise of its constituent power under article 368 and that section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, affects the basic structure of the Constitution. This aspect was dealt with by this Court in Hotel Dwaraka's case [1985] 58 STC 241 and the above-referred contention was rejected by giving cogent reasons. We are in agreement with that decision. The next question that arises for consideration is whether the State Government is entitled to recover the tax from the dealers for the period prior to 2nd February, 1983. This Court held in Hotel Dwaraka's case [1985] 58 STC 241 that section 6 of the Constitution (Forty-sixth Amendment) Act did not authorise the imposition and collection of tax in future, that is, after 2nd February, 1983. The Governor of Andhra Pradesh promulgated the Andhra Pradesh General Sales Tax Act (Second Amendment) Ordinance, 1985, and subsequently the Andhra Pradesh General Sales Tax (Third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to enable the assessing authorities to recover the tax payable by the dealers for the period prior to that date. The learned Advocate-General has cited a decision of the Supreme Court in Ahmedabad M. C. Printing Co. v. S.G. Mehta AIR 1983 SC 1436 in support of his contention that the legislature may affect substantial rights by either enacting laws which are expressly retrospective or by using the language which has that necessary result and that such language may give an enactment more retrospectivity than what the commencement clause gives to it. In that case Hidayatullah, J. (as he then was), speaking for himself and Raghubar Dayal, J., stated at page 1445 in para 34, the legal position in the following terms: "The date on which the amendment comes into force is the date of the commencement of the amendment. It is read as amended from that date. Under ordinary circumstances, an Act does not have retrospective operation on substantial rights which have become fixed before the date of the commencement of the Act. But this rule is not unalterable. The legislature may affect substantial rights by enacting laws which are expressly retrospective or by using language whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otels, restaurants and eating houses. However, in view of the judgment of the Supreme Court in Northern India Caterers v. Lt. Governor of Delhi [1978] 42 STC 386 (SC); AIR 1978 SC 1591 that the supply or service of foodstuffs in the hotels, restaurants and eating houses will not come within the definition of "sale", it was held that tax could not be levied on such transactions. The Parliament removed the basis of that judgment and nullified its effect by the Constitution (Forty-sixth Amendment) Act, 1982, by enlarging the scope of the expressions "tax on the sale or purchase of goods" and "sale". It further validated all the past transactions of supply of food or drinks in the hotels, restaurants and eating houses. When the validation of the past transactions of supply of food was held to be valid by reason of the change in the law, it can as well be held that under section 6 of the Constitution (Forty-sixth Amendment) Act and the provisions of the Andhra Pradesh General Sales Tax Act prior to their amendment by Act No. 18 of 1985, the State Government can levy and collect tax in respect of those past transactions, of course, subject to the exemption provided under subsection (2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o stated by the learned counsel on the basis of the averments made in the affidavits that the petitioners did not collect any tax on the foodstuffs supplied or served by them because no such tax could have been levied or collected at that time in view of the decision of this Court in Durga Bhavan's case [1981] 47 STC 104. The learned counsel referred to the averments made in the counter-affidavit filed on behalf of the respondents to show that they did not dispute the averments that the petitioners did not collect tax and that there was no categorical statement in the counter that the petitioners collected the tax prior to 2nd February, 1983. It was further contended that as per the Andhra Pradesh Catering Establishments (Fixation and Display of prices of foodstuffs) Order, 1978, the petitioners were prohibited from charging a price higher than the price fixed under that Order and the price charged by them was not inclusive of sales tax. On the other hand it was submitted by the learned Advocate-General that generally the hoteliers in the State were issuing consolidated bills to the customers without showing sales tax separately even in respect of counter sales which were admittedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and there is nothing illegal or improper in placing the burden on the person who claims the benefit of such exemption, in particular when the necessary material and information required for the purpose is within the exclusive knowledge of the assessee. That was a case where burden was placed on the person who wanted to claim development rebate under section 10(2)(vi)(b) of the Income-tax Act. The learned Judges held that when conditions were imposed for claiming exemption by a person it was for that person to satisfy those conditions. In the instant case what is provided under sub-section (2) of section 6 of the Constitution (Fortysixth Amendment) Act and sub-section (3) of section 38 of the Andhra Pradesh General Sales Tax (Amendment) Act (No. 18 of 1985) is in the nature of an exemption and whether the tax was collected or not will be within the special knowledge of the assessee. In such a case, it cannot be said that the burden has been wrongly placed on the assessee to prove that he did not collect the tax. As already stated, the petitioners paid the tax on the food supplied in the hotels, restaurants and eating houses till September, 1980, when the decision in Durga Bhavan' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to decide in each case whether the burden has been discharged or not and it will not be proper for this Court to lay down any principle as to how the burden has to be discharged or when the burden can be said to have been discharged. The other question that arises for consideration is whether the imposition of tax from 2nd February, 1983, the date on which the Constitution (Forty-sixth Amendment) Act, 1982, came into force, to 10th April, 1985, the date on which the Andhra Pradesh General Sales Tax (Amendment) Ordinance, 1985, was promulgated by the Governor, is legal and valid. In Hotel Dwaraka's case [1985] 58 STC 241 this Court held that section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, did not authorise the imposition of tax in future, that is, from 2nd February, 1983, and that it was competent for the State Legislature to amend the provisions of the Andhra Pradesh General Sales Tax Act providing for levy of tax on the supply of food by way of service, etc. Accordingly, the Governor first promulgated the Ordinance No. 2 of 1985 which was replaced by the subsequent Ordinance No. 9 of 1985. That Ordinance was ultimately replaced by the Andhra Pradesh General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Supreme Court in Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 at 35 (SC); AIR 1983 SC 1019 at 1047. Dealing with the contention whether retrospective imposition of tax violates the fundamental rights under articles 14 and 19(1)(g) the Supreme Court observed in Empire Industries Ltd. v. Union of India (1985) 3 SCC 314 at 341 as under: "Imposition of tax by legislation makes the subjects pay taxes. It is wellrecognised that tax may be imposed retrospectively. It is also well-settled that that by itself would not be an unreasonable restriction on the right to carry on business. It was urged, however, that unreasonable restrictions would be there because of the retrospectivity. The power of the Parliament to make retropective legislation including fiscal legislation are well-settled [see Krishnamurthi Co. v. State of Madras [1973] 31 STC 190 (SC); [1973] 2 SCR 54; (1973) 1 SCC 75; 1973 SCC (Tax) 114]. Such legislation per se is not unreasonable. There is no particular feature of this legislation which can be said to create any unreasonable restriction upon the petitioners. ................... It is necessary that the legislature should be able to cure ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduce a serious infirmity in the retrospective operation. On the other hand, we may get cases where the period covered by the retrospective operation of the statute, though long, will not introduce any such infirmity. Take the case of a validating Act. If a statute passed by the legislature is challenged in proceedings before a court and the challenge is ultimately sustained and the statute is struck down, it is not unlikely that the judicial proceedings may occupy a fairly long period and the legislature may well decide to await the final decision in the said proceedings before it uses its legislative power to cure the alleged infirmity in the earlier Act. In such a case, if after the final judicial verdict is pronounced in the matter the legislature passes a validating Act, it may well cover a long period taken by the judicial proceedings in court and yet it would be inappropriate to hold that because the retrospective operation covers a long period, therefore, the restriction imposed by it is unreasonable. That is why we think the test of the length of time covered by the retrospective operation cannot by itself be treated as a decisive test. .........between 1950 and 1960 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... February 27, 1975, i.e., the date on which the judgment in Khemka's case [1975] 35 STC 571 (SC); AIR 1975 SC 1549 was delivered up to the date of the commencement of the amending Act in computing the period of limitation for questioning any order levying penalty. In those proceedings the authorities concerned are sure to consider all aspects of the case before passing order levying penalties. The contention that the impugned provision is violative of article 19(1)(f) and (g) of the Constitution has, therefore, to be rejected." In the instant case, the supply or service of food in hotels, restaurants and eating houses in the State of Andhra Pradesh was held to be not a sale and as such not exigible to tax. It was so held by this Court in Durga Bhavan's case [1981] 47 STC 104 on 19th September, 1980, having regard to the judgment of the Supreme Court in Northern India Caterers' case [1978] 42 STC 386 (SC); AIR 1978 SC 1591. Till then, the hoteliers were paying the tax on such supply and service of food and drinks. Against that decision, an appeal was preferred by the State in the Supreme Court and the matter is still pending. The Parliament passed the Constitution (Forty-sixth Ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qually incorrect to state, having regard to the provisions of law referred to above that the tax is levied without authority of law. However, Sri Nariman, the learned counsel for the petitioners, has placed strong reliance on two judgments of the Supreme Court in Collector of Customs and Central Excise v. Oriental Timber Industries [1985] 3 SCC 85 and Ram Chandra Kailash Kumar Co. v. State of Uttar Pradesh AIR 1980 SC 1124. Collector of Customs and Central Excise v. Oriental Timber Industries [1985] 3 SCC 85 was a case where the respondent-firm was a small-scale industry and carried on business in the manufacture of plywood circles. Prior to the impugned notification, the assessment of excise duty was made on the plywood circles and not on plywood as and when the same came out of the press. It was only in the year 1967 the excise authorities sought to change the mode of assessment because of audit objection. Aggrieved by that, the respondent-assessee approached the High Court and he succeeded there. Thereafter the Collector of Customs and Central Excise preferred an appeal to the Supreme Court in 1971 and it was disposed of in the year 1985. While disposing of the appeal, the S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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