9911796707
TMI Blog1993 (10) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... e the formation of the petitioner-corporation, these functions were being discharged by the Department of Food, Government of India themselves. In order to carry out these objectives, the petitioner-corporation procures foodgrains in the surplus States and distributes the same to the other States as per the policy of the Government of India. In order to carry out these objectives mentioned above, the petitionercorporation has its branches in various States. The present petition relates to the operations of the corporation in the State of Punjab, which operations for taxation purpose, are controlled by the branch of the petitioner-corporation at Patiala, which is registered under the State Act as well as the Central Sales Tax Act, 1956 (hereinafter referred to as "the Central Act") as a dealer. In this petition, the petitioner-corporation is challenging, inter alia, the constitutional validity of section 4-B of the State Act, as also Notification No. S.O. 19/P.A./46/48/S.4.B/73 dated April 6, 1973, as modified by Notification No. S.O. 89/P.A./46/48/S.4.B/73, dated December 20, 1973, issued under section 4-B of the State Act and the competence of the Government of Punjab to impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the purview of the exclusive legislative competence of the Parliament, due to the insertion of, a new entry in the Union List in the shape of entry 92-B, a new sub-clause (b) in clause (i) of article 269, as well as the amended clause (3) of article 269 of the Constitution. On this reasoning, it was prayed that in the facts and circumstances of this case, the levy and liability of tax on petitioner-corporation on wheat and bardana consigned outside the State of Punjab to other States falls within the ratio of the law laid down by the judgments of the Supreme Court in Goodyear's case [1990] 76 STC 71 and Mukerian Papers' case [1991] 81 STC 152; that the levy of purchase tax on the petitioner-corporation to the extent of liability of tax in respect of those purchases, which purchased goods are despatched/consigned outside the State by the petitioner-corporation is illegal and ultra vires as the same is being imposed by the Legislature of the State of Punjab which is not competent to impose the same. Though it is not apparent but looking into the true nature of the tax, it can be seen that the actual taxable event is the consignment of the goods and not the purchase thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh, deferred payment or other valuable consideration; (ii) transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract; (iii) delivery of goods on hire-purchase or any system of payment by instalments; (iv) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; and (v) 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." "Purchase" as defined in section 2(ff) of the State Act means: "(ff) 'Purchase' with all its grammatical or cognate expressions means the acquisition of goods specified in Schedule 'C' or of goods on the purchase whereof tax is payable under any provision of this Act for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge and includes: (i) transfer, otherwise than in pursuance of a contract, of property in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to any person or is to be or has been discharged by payment of money or by transfer or delivery of goods or by any other means; but does not include any sum payable as a penalty or as compensation or damages for breach of the agreement. Explanation (4): The amount to be included in the turnover in respect of movable goods agreed to be sold under a works contract, shall be its 'sale price'. " Section 4-13 of the State Act, is as under: "4-B. Levy of purchase tax on certain goods.-Where a dealer who is liable to pay tax under this Act purchases any goods other than those specified in Schedule B from any source and- (i) uses them within the State in the manufacture of goods specified in Schedule 'B', or (ii) uses them within the State in the manufacture of any goods, other than those specified in Schedule 'B' and sends the goods so manufactured outside the State in any manner other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or (iii) uses such goods for a purpose other than that of resale within the State or sale in the course of inter-State trade or commerce or in the course of export out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red dealer in Punjab. Registered dealers are not taxed. The purchasing dealers in such cases issues a statutory form to the seller on the production of which deduction is allowed from the gross turnover of the selling dealer. In the chain of transactions from one registered dealer to another registered dealer, only such forms are inter-changed and no tax is levied. The main reliance of the petitioner was on Goodyear's case [1990] 76 STC 71 (SC). In Goodyear's case [1990] 76 STC 71 (SC), the dealer manufactured tyres. For doing so, they purchased certain items from within the State of Haryana without the payment of any tax, i.e., on the basis of their sales tax registration certificate. Out of the goods purchased, dealer manufactured tyres and sent them on consignment/branch transfer basis to other States in India. State of Haryana used to charge tax on the purchase value of the goods purchased by them from within the State and used in the manufacture of tyres ultimately sent to other States on consignment basis. On these facts, it was held by their Lordships of the Supreme Court that the State Government was in fact taxing the event of the consignment of the goods. In the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 9(1) of the HGSTA because the sales made by them were not in the course of export outside the territory of India within the meaning of section 5(1) of the Central Sales Tax Act, 1956. However, the assessees were held not liable to pay purchase tax on the raw material as a result of subsequent disposal because their sales would still be otherwise covered by one or the other of the three exempted categories set out in section 9(1)(b), i.e., local sales, inter-State sales and export sales. This matter was again taken up by their Lordships of the Supreme Court in Hotel Balaji's case [1993] 88 STC 98. The point in issue was the same as in Goodyear's case [1990] 76 STC 71 (SC). The relevant provisions of the Andhra Pradesh and Uttar Pradesh Sales Tax Acts, were under consideration of the honourable Supreme Court of India. The provisions of section 6-A of the Andhra Pradesh General Sales Tax Act, are similar to section 4-B of the State Act and section 9(1) of the HGSTA, which was declared to be ultra vires the competence of the State Legislature in Goodyear's case [1990] 76 STC 71 (SC). The Bench in this case consisted of three honourable Judges. Mr. Justice S. Ranganathan, who was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case in regard to the construction of section 80M must be held to be erroneous and it must be corrected. To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience. In this, we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter (AMY at page 18) "a judge ought to be wise enough to know that he is fallible and, therefore, ever ready to learn: great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead: and courageous enough to acknowledge his errors".' For the reasons abovementioned, I agree with my learned brother and hold that the impugned provisions under all the three enactments are intra vires the powers of the concerned State Legislatures." In Hotel Balaji's case [1993] 88 STC 98, it was held by the Supreme Court as under: "Broadly speaking, the effect is: Tax payable at sale point becomes the tax payable on the purchase point, in certain circumstances. Because, the seller is not or cannot be taxed for certain reasons, the purchasing dealer is being taxed ......." It was further held: "It would, therefore, be clear that the real ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public-tax both the raw material and the finished (manufactured) product. This is a well-known policy in the field of taxation. But where the manufactured goods are not sold within the State but are yet disposed of or where the manufactured goods are sent outside the State (otherwise than by way of inter-State sale or export sale) the tax has to be paid on the purchase value of the raw material. The reason is simple: if the manufactured goods are disposed of otherwise than by sale within the State or are sent out of the State (i.e., consigned to dealers' own depots or agents), the State does not get any revenue because no sale of manufactured goods has taken place within Haryana. In such a situation, the State says, it would retain the levy and collect it since there is no reason for waiving the purchase tax in these two situations. Now coming to inter-State sale and export sale, it may be noticed that in the case of inter-State sale, the State of Haryana does get the tax revenue-may not be to the full extent. Though the Central sales tax is levied and collected by the Government of India, article 269 of the Constitution provides for making over the tax collected to the States in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the State, inasmuch as the last purchase point in regard to any goods could be determined only when the goods are sold later and not when the goods are purchased ......." The decision in Malabar Fruit Products Company v. Sales Tax Officer [1972] 30 STC 537, rendered by Mr. Justice P.S. Poti of the Kerala High Court of which reference is made by their Lordships repeatedly in their judgment, was approved by a three Judge Bench of the Supreme Court in the State of Tamil Nadu v. M.K. Kandaswami [1975] 36 STC 191. While further expressing their difficulty to agree with the reasoning of Mr. Justice Sabyasachi Mukharji in Goodyear's case [1990] 76 STC 71 (SC) it was observed by their Lordships of the Supreme Court in Hotel Balaji's case [1993] 88 STC 98 as under: "...........It is also not possible to agree with the learned Judge when he says that 'the two conditions specified, before the event of despatch outside the State as mentioned in section 9(1)(b), namely, (i) purchase of goods in the State and (ii) using them for the manufacture of any other goods in the State are only descriptive of the goods liable to tax under section 9(1)(b) in the event of despatch outside the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1] 2 SCC 580. The case arose under the Punjab General Sales Tax Act and the provision which fell for interpretation was section 4-B. It levied purchase tax on the raw material used in the manufacture of goods which in turn are sold outside the State otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India. The argument for the assessee/appellant was that the main question of law involved in this case is concluded by the decision of this Court in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC); [1990] 2 SCC 71 which was an appeal arising from the High Court decision in the case of the same assessee........". It was this contention which was examined by the Bench. Section 4-B of the Punjab Act was analysed and it was found that it is in material particulars, similar to section 9 of the Haryana Act even though the language was not identical. Ahmadi, J., speaking for the Bench, observed: 'therefore, even though the language of section 4-D of the Act is not identical with the relevant part of section 9(1) of the Haryana Act, it is in substance similar in certain respects, particularly in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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