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TMI Blog1997 (1) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph 13(iii) of entry No. 175 of the notification under section 49(2) of the said Act as arbitrary, illegal and unconstitutional. 2.. At the outset it may be mentioned that during the arguments, the learned counsel for the petitioners confined the reliefs sought to the challenge against the provision of paragraph 8(iii) of the resolution dated June 16, 1987 and paragraph 13(iii) of entry No. 175 of the notification issued under section 49(2) of the said Act and the deduction of Rs. 4,98,01,531 in respect of goods transported for sale outside the State as sales tax incentives enjoyed by the petitioner under the order made by the Sales Tax Officer and did not press the challenge in this petition as regards turnover tax and purchase tax on the ground that an appeal was already preferred as regards those items by the petitioners-assessee and that they could be dealt with by the appellate forum. 3.. The assessee-petitioner No. 1 is a public limited company having its registered office at Cochin in the State of Kerala. The said company is in the business of manufacturing automobile tyres, tubes and flaps and is a registered dealer under the said Act as well as under the Central S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly provided that the transactions undertaken by the certificate holder relating to deferred payment of tax were subject to the resolution dated June 16, 1987 of the Finance Department and the certificate holder was to abide by those conditions. In clause (11) it was noted that keeping in view the consent of the unit as per the letter dated April 16, 1992 the certificate was to be effective from May 1, 1992 to September 15, 2005. 4.. Incentives for pioneer units were provided under the resolution dated May 7, 1986 by framing a scheme known as "Special Incentive Scheme, 1986" which was to remain in force from April 1, 1986 to March 31, 1991 in respect of the areas mentioned in annexure A to that resolution. Accordingly, the units which fulfilled the criteria of pioneer status and were granted registration by the Industries Commissioner were eligible for the benefit of subsidy and one of the two sales tax incentives of sales tax exemption and sales tax deferment. The pioneer units claiming the incentives under this scheme were not eligible for sales tax incentives under any other scheme. The quantum of sales tax incentives was indicated separately in respect of sales tax exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of the fixed capital investment with a timelimit of 14 years from the date of commencement of commercial production in respect of the category A of the area. Under clause 8 of the said resolution which is sought to be challenged by the petitioners it was laid down that the limit of deferment shall be arrived at as indicated therein. Accordingly, as per clause 8(iii) an amount calculated at the rate of 4 per cent or the rate applicable under the Gujarat Sales Tax Act, 1969 whichever was lower on the sale price of the goods transported by the new industrial unit to his own place of business or of his agent at any place within India but outside the State of Gujarat for sale there, was to be computed for arriving at the limit of deferment besides the aggregate amount of tax including additional tax that might have become leviable on the sales as well as the aggregate amount of Central sales tax which would have become leviable on inter-State sales. In this context, it may be mentioned that the provisions regarding payment of tax and deferred payment of tax are incorporated in section 47 of the said Act. Under the scheme of deferred payment of tax, the tax which is collected on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is lower on the sale price of the goods transported by the specified manufacturer to his own place of business or to the place of business of his agent at any place within India but outside the State of Gujarat for sales there, shall also be considered". The expression "specified manufacturer" is defined in annexure II for the purpose of the said entry No. 175, inter alia, as a person who establishes the new industry on or after April 1, 1986 but not after March 31, 1991 in any of the designated areas. It is stated that the incentives schemes were extended up to March 31, 1993 and that the petitioner was a pioneer unit who was eligible for this incentive and there is no dispute on this aspect. As noted above under the composite scheme, Composite Sales Tax Incentive Scheme, 1987 framed under the resolution dated June 25, 1987, the pioneer industries units who opted for the composite scheme were entitled to the benefit of the scheme as mentioned in annexures I and II of the resolution limited to the amount and the period mentioned in column (4) thereof. The calculations of the sales tax incentives admissible were to be made as per the procedure decided by the Industries Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x deferment incentive contained in the resolution dated June 16, 1987 were also mentioned in the eligibility certificate given to the petitioners on April 18, 1992 in paragraphs 2 and 3 thereof wherein it was specifically stated that the petitioner was required to abide by those conditions. The petitioner has challenged the condition which enabled the department to compute the aggregate amount of tax at the rate of 4 per cent or the rate applicable under the said Act whichever is lower on the sale price of the goods transported by the new industrial unit to his own place of business or his agent at any place within India but outside the State of Gujarat for sales there while working out the entitlement limit for the incentives. 8.. The learned counsel appearing for the petitioners contended that in respect of the goods which were transported by the petitioners out of its manufactured goods to a place outside the State for being sold there, no sales took place within the State of Gujarat, and therefore, there was no liability to pay any tax in respect thereof under the said Act. It was submitted that these were also not sales of the nature of inter-State trade or commerce and no l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Additional Advocate-General appearing for the respondents submitted that by imposing the impugned condition no sales tax was levied on the sales that were effected outside the State. It was submitted that exemption from liability to pay tax or any other incentive could not have been claimed as a matter of right and it was open for the State Government to prescribe the limits of the exemption by imposing such conditions. It was submitted that by the impugned condition it was implied that the sales will be effected in Gujarat for the purpose of incentive limits and if the sales were effected outside Gujarat then the minimum revenue loss, that occurred to the State by virtue thereof, was to be adjusted towards the eligibility limit of the incentives. This was done by accelerating the limit as provided in the said condition, the effect of which was to deprive the specified manufacturer that much benefit of exemption. Such a condition can never be said to be imposition of tax and it was only in effect and reality denial of exemption to the extent of revenue loss resulting from the sales effected by such manufacturer outside the State. It was also submitted that the petitioners had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king of the goods so manufactured and if the specified manufacturer fulfils the conditions specified in annexure I to the said resolution. "specified manufacturer" is granted exemption in respect of sale of raw materials, processing materials, consumable stores or packing materials by a registered dealer to him as provided in clause (2) of entry 175 to the extent to which the amounts of sales tax exceeded th of 1 per cent and to the extent to which the amount of Gujarat sales tax exceeded th of 1 per cent if he furnishes to the selling dealer a certificate in form 20 declaring, inter alia, that the goods were required for use by him within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials, and if the specified manufacturer fulfils the conditions of annexure I. The "specified manufacturer" is by clause (3) of entry 175 granted exemption of the whole tax on sales by him of goods manufactured by him, if he does not give any certificate in form 40 to any dealer purchasing such goods from him and incorporates a declaration in the bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of exemption provided in respect of the new industry like the petitioner was 90 per cent of fixed capital investment with a time of a period of 14 years from the date of production. Under clause (11) it is provided that when the limit of tax exemption specified in annexure V exceeds, then the subsequent purchases and sales of the specified manufacturer shall cease to be exempt against a declaration provided under this entry. 14.. Clause No. (13) of annexure I of entry 175 which contained the impugned condition (iii) reads as under: 13. For the purpose of arriving at the limit of tax exemption as specified in annexure V, the aggregate of following shall be considered: (i) aggregate amount of tax including additional tax, if any, which would have become leviable from the specified manufacturer on purchases and sales as per sub-entries (1), (2), (3) and (4); (ii) aggregate amount of Central sales tax which would have become leviable on inter-State sales made under Government Notification No. (GN-99) CST-1086/ S.8(5)(69)-TH, dated December 23, 1986, issued under sub-section (5) of section 8 of the Central Sales Tax Act, 1956; (iii) aggregate amount of tax at the rate of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was entitled to. The method of arriving at the limit of the exemption by computing the revenue loss which could be occasioned by virtue of sales effected outside the State can hardly be termed as an imposition of tax or treating such sales as deemed sales within the State. No tax is charged in respect of the transported goods, by the said condition, but, only the exemption limit stands reduced to the extent of the minimum revenue loss on the sale price of the goods transferred out of the State for sale there. The exemption, is in other words, denied to the extent of loss of revenue at the minimum scale in respect of the goods transported for sale outside the State. The exemption from sales tax obviously was intended for the sales that could be taxed under the Act. By providing that for reaching the upper limit of quantum of exemption the minimum tax that could have become payable if the goods transported and sold out of the State through the branches of the assessee were sold as taxable goods, there is necessarily laid down an implied condition for the exemption limit that to claim the benefit of exemption all the sales effected will be taxable sales and if before the upper li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State on sales which are effected outside the State and it is only denial of exemption from payment of tax on the sale price of the goods which are diverted for sale outside the State. Such denial of exemption can never be treated as an indirect levy of sales tax. It only means that if you sell the goods manufactured by you in this State, outside the State the exemption limit will be treated to have been exhausted by you to that extent, meaning thereby that if the sales are effected outside the State the exemption limit will be denied to that extent by treating it as having been already exhausted and not available for local sales. This is achieved by accelerating the reaching of the upper limit of exemption. The purpose obviously is to prevent the revenue loss to the State because if the upper limit is reached, the exemption would cease to operate and all the sales thereafter within the State would be taxable. Such condition of exemption imposed for the purpose aforesaid would not at all affect the nonliability of the transaction, effected outside the State, to levy or imposition of sales tax by virtue of the provisions of article 286 of the Constitution and the corresponding provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal sales tax liability would also mean tax payable under the Central Sales Tax Act, 1956, on the sales of finished products of the eligible unit made in course of inter-State trade or commerce computed at the rate of tax applicable to such sales as if these were made against the certificate in form C on the basis that the sales are exigible to tax under the said Act. It was simultaneously provided that for the purpose of this clause, branch transfers/transfers on consignment basis outside the State of Maharashtra shall be deemed to be "sale in the course of inter-State trade or commerce". This deeming provision of clause 2.11 was impugned on the ground that the State Legislature has no legislative competence to levy tax on sales or purchase of goods unless the transaction amounts to sale or purchase within the framework of entry 54 of List II of the Seventh Schedule to the Constitution read with the wider definition of the expression "sale or purchase of goods" provided by sub-clause (29A) of article 366 of the Constitution of India and that mere transfer of stocks from one branch to another within the State or outside the State can never constitute sale. It was contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act provided only for partial exemption from tax or prescribes lawful condition appended thereto, that would be a different matter". In the present case, there is no conflict between any administrative scheme and the statutory notification issued under section 49(2) of the Act and since the provisions are made under entry 175 of imposing statutory conditions while granting exemption which had the effect of providing only an exemption as regulated by the conditions, the decision in Varun Polymol Organics Ltd.'s case [1995] 97 STC 55 (Bom) can hardly assist the petitioners. It will also be noted that in that case branch transfers and consignment of goods were for the purpose of computation of notional sales tax liability considered as deemed sales. There is no such provision made in the impugned condition which only provided that while computing the eligibility limit of exemption, the revenue loss at its minimum level caused due to sales diverted outside the State would be computed for reaching the limit and as we have held above that would not amount to any indirect levy of sales tax in respect of the goods transported for sale outside the State. If Varun Polymol Organics Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State of Maharashtra gets the tax only in respect of purchase made by the appellant within the State. So far as the sales tax leviable on the sale of goods manufactured by the appellant was concerned, the State of Maharashtra could levy and collect such tax only in respect of sales effected within the State of Maharashtra. In law, apart from these rules 41 and 41A, the appellant had no legal right to claim set-off of the purchase tax paid by him on his purchase within the State from sales tax payable by him on the sales of goods manufactured by him. It was only by virtue of these rules that he was entitled to such set-off. It was held that this was really a concession and an indulgence. Then comes the material portion which reads as under: "More particularly, where the manufactured goods are not sold within the State of Maharashtra but are despatched to out-State branches and agents and sold there, no sales tax can be or is levied by the State of Maharashtra. The State of Maharashtra gets nothing in respect of such sales effected outside the State. In respect of such sales, the rule-making authority could well have denied the benefit of set-off. But it chose to be generous and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through its branches outside the State of Gujarat. Again in paragraph 15(A) it is reiterated that when a dealer transfers the goods manufactured or produced in the State to his branch outside the State, there was no sale and the provisions of section 87 of the Act were not attracted. It is further stated that the rationale underlying the impugned provision was that the State of Gujarat which granted exemption by way of sales tax incentives for the purpose of development of backward areas and consequential fillip to its trade and commerce should not be altogether and substantially deprived of its revenue and that when a dealer entitled to sales tax incentives, sells the goods in the State or in the course of inter-State trade or commerce the State earns revenue by way of tax. It is also submitted that the question of doing something indirectly which cannot be done directly does not arise in the instant case. It was, thus, clearly the case of the State Government, in the affidavit-in-reply, that the impugned conditions were imposed while granting exemption to see that there was no revenue loss caused to the State because by computing the minimum revenue that it would have earned on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are just and proper and there is no element of arbitrariness in them. These conditions are part of the policy of the State Government formulated for providing conditional exemption from sales tax or deferment of payment of tax. Therefore, having utilised the eligibility certificate containing these conditions, it is not open now to the petitioner No. 1 to contend that they are not binding. The petitioner No. 1 is therefore not a fit person in whose favour jurisdiction can be exercised by this Court by way of a discretionary remedy. 21.. Under the above circumstances, the petitioners failed in their challenge against the impugned conditions of para 13(iii) of entry 175 of the notification under section 49(2) of the said Act and para 8(iii) of the resolution dated June 16, 1987 and their challenge against the impugned order at annexure C to the extent of deduction thereunder of the amount of Rs. 4,98,01,531 as sales tax incentives treated as enjoyed by the petitioners during the concerned assessment period therefore also fails. The petition is therefore rejected. Rule is discharged with no order as to costs. RAJESH BALIA, J.-Through this petition the petitioners challenge the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The levy and collection of tax or for that matter authorisation of imposition of tax on sales or purchase of goods in the course of inter-State trade or commerce or which has taken place outside the State concerned or which have taken place in the course of import of goods into India and export of goods out of the territory of India is beyond the province of the State legislative or its executive authority. It would also not admit of any doubt that any sales or purchase which has actually taken place in the course of inter-State trade or commerce or outside the State or in the course of import of goods into India or export of goods out of the territory of India by applying the principles for determination of these questions in accordance with the provisions made by Parliament, namely, under the Central Sales Tax Act, the State cannot provide for levy or imposition by creating legal fiction contrary to it. 24.. Section 3 of the Gujarat Sales Tax Act, 1969 provides for levy of tax on all sales or purchases of goods made during the year, preceding year within which the specified day falls, or the year commencing on the first day of the year within which the specified date falls, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its publication with or without modification as may be made by Legislative Assembly, making it, beyond doubt that the notification granting exemption is of legislative character. 25.. From the aforesaid provisions it can be said that levy under the Act is on the sales or purchase of goods made within the State. The levy is on the annual turnover of purchase or sales which is taxable under the Act. The returns for sale or purchase carried out during the year which are subject to tax are required to be furnished annually and the amount of tax due from a dealer is also required to be processed for each year separately. Section 47 read with section 49 also makes it clear that the Act also envisages independent of any exemption that may be granted from payment of tax altogether or partial, it also envisages deferment of the payment of sales tax which is payable under the Act on specified dates to a later time under incentive scheme of the State. What is envisaged in section 49 is exemption from payment of tax and what is envisaged under incentive scheme for deferment is not exemption but mere deferment of payment of tax to a later date than when it is due. 26.. Entry No. 175 insert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The last clause envisaged that in that case the entire sale of the manufactured goods shall be made out of State. In other words for availing exemption under sub-entry (4), there ought to be no future sales of such goods within the State attracting Gujarat sales tax. This last subentry was deleted with effect from March 19, 1991. 30.. Apart from the details enumerated above, one condition in column No. 4 against each sub-entry 175 inhibits the exemption subject to the conditions specified in annexure I. 31.. One may notice that but for the reference to annexure I the exemption envisaged under section 175 is from the payment of tax leviable under the Act for indefinite amount of tax. As noticed above, the tax is levied annually the exemption under entry 175 has reference to tax leviable and payable during the year concerned. Since the entry itself does not specify the period during which the exemption is to continue, the exemption is to continue year after year unless withdrawn, subject of course to other conditions. 32.. The conditions envisaged under annexure I are: (1) that the specified manufacturer has established new industry in the designated areas; (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avail the benefit under entry 175, he is not entitled to certain drawbacks or deductions from taxable turnover permissible under sections 12 and 13 or under any other entries of the notification issued under sub-section (2) of section 49 of the Act. 33.. The genesis of contention arises with reading paras 10 to 13 of annexure I. Para 10 tells of monetary limit up to which a specified manufacturer is eligible for exemption from tax. Monetary limit is specified in annexure IV. Annexure V which specified the limits up to which maximum exemption can be availed also provides the extent of period during which exemptions in respect of various categories of areas specified in annexure IV and in respect of pioneer new industries can be availed. In part 3 of the annexure V a Pioneer Industry in specified category A is eligible up to 90 per cent of its fixed capital investment as exemption from tax and such exemption can be availed of for a period of 14 years from the date of commencement of the commercial production, during which the exemption to the said monetary limit is to be availed of. The monetary limit in respect of Pioneer Industries situated in areas specified in category B is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable from the specified manufacturer on purchases and sales as per sub-entries (1), (2), (3) and (4); (ii) aggregate amount of Central sales tax which would have become leviable on inter-State sales made under Government Notification No. (GN-99) CST-1086/ S.8(5)(69)-TH, dated December 23, 1986, issued under sub-section (5) of section 8 of the Central Sales Tax Act, 1956; (iii) aggregate amount of tax at the rate of 4 per cent or the rate applicable under the Gujarat Sales Tax Act, 1969 whichever is lower on the sale price of the goods transported the specified manufacturer to his own place of business or to the place of business of his agent at any place within India but outside the State of Gujarat for sale there; (iv) the aggregate amount of tax leviable under section 15B of the Gujarat Sales Tax Act, 1969. The aforesaid entry 175 concerns the exemption from tax leviable under the Act. Since deferment of payment of tax, as the name suggests, neither gives exemption from the liability to tax nor absolves the assessee from payment of tax but merely postpone the payment of tax payable by the assessee, obviously would not be governed by the provisions of section 49 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period the amount of tax on the sales, the payment of which has been postponed, will be paid by such units into the Government treasury by six equal annual instalments. Accordingly, the first such instalment shall be paid within a period of sixty days from the end of the accounting year, during which the aforesaid period expires and thereafter, each of the remaining five instalments shall be paid within a period of sixty days from the end of the respective accounting year. No interest will be charged on the amounts so deferred. .................. (6) The benefit underlying this scheme shall cease to continue in the case of a new industry being in the areas specified in columns 2 to 7 of the table below, as soon as the aggregate of amounts of tax which would have become payable by the new industrial unit, but for the availability of the benefit under this scheme, during the period commencing on or from 1st April, 1986 or as the case may be, the date of commissioning the new industry and ending at the end of the period specified in columns 4 and 7 to annexure I and column 3 to annexure II, become equal to the amount specified in columns 5 and 6 to annexure I and column 2 to anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period of the operation of the scheme that is to say in respect of monetary limit up to which he was entitled to one he could either opt exemption from payment or could opt for deferment scheme or for both by exercising his options as per his choice aggregate of which not to exceed the monetary limit. However, this does not alter the basic condition of availing of the benefits under the two schemes while they were operating separately and independently. 35.. It has been the contention of the petitioners that the quantum of tax exemption having been fixed at Rs. 45 crores in his case and period during which he could avail of that exemption or other benefits also having been fixed, the only question thereafter which remains to be worked out was to compute the quantum of benefit availed by him during this period so as to give effect to the provisions of the scheme that as soon as he crosses the monetary limit to which he is entitled to, he starts making payment in respect of further taxable transaction carried on by him. This exercise entails only one determination namely, to assess the tax liability ex hypothesi which has been fixed in respect of assessee as per the relevant S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the rest of the provision inasmuch as even in the absence of impugned provision, the workability of the scheme, without any additions, alterations or amendments, is not affected. 38.. Before proceeding with the analysis of this controversy I may refer to the opinion of Lord Dunedin in Whitney v. Commissioners of Inland Revenue [1926] AC 37 which has found its approval by the courts in India in Chatturam v. Commissioner of Income-tax [1947] 15 ITR 302 (FC); AIR 1947 FC 32 and A.V. Fernandez v. State of Kerala [1957] 8 STC 561 (SC); AIR 1957 SC 657, that there are three stages of imposition of a tax. There is the declaration of liability that is the part of the statute which determines what person, in respect of what property are liable. Next there is the assessment. Liability does not depend on assessment. That ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the method of recovery if the person taxed does not voluntarily pay. 39.. When one speaks of claiming a benefit or exemption from payment of tax, it could have two shades. First the claim may be that there is no charge to levy, that is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availed of is spread over for a period of 14 years. Obviously, the fixation of limit under the notification or scheme is not determination of tax liability ex hypothesi on the basis of any taxing statute but is a monetary limit up to which on determination of tax annually, a person can claim exemption from payment of that liability for that year, because of the provisions referred to above and all other conditions having been fulfilled. The assessment is integral part of provision for imposition of tax each year by determination of taxable turnover and determination of tax liability that arises on such turnover in accordance with the provisions of the Act. However, since the provisions of entry 175 and the deferment which provides exemption or deferment of such liability every year subject to availability of eligible limit of exemption for that year and also conditions the exemptions up to a maximum time-limit whether exemption is availed up to that period or not is a further fact is also required to be determined periodically, i.e., at the close of every year as to what is the remainder of the limit to which the beneficiary is entitled to avail of the benefits for the next year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e examined in details. As noted above, the law authorises the State Legislature to impose tax on sales and purchase of goods, the limitation which curtails the length and width of this legislative field are contained in entry 54 itself coupled with article 286. Beyond that there is no curtailment in the field of legislative competence of the State Legislature. 43.. No provision has been pointed out to us under the Sales Tax Act which authorises imposition of tax outside the State of Gujarat. On the contrary, as noticed above, the State Legislature has imposed tax on the turnover which takes place during one year at the rate specified by the State by notification from time to time and the determination of that liability is also annual. Therefore, at the time of determination of the limit of exemption which a person can avail of in future cannot be considered to be an imposition of tax and exemption therefrom. The imposition and exemption is relatable only to the sales and purchases of the year with which the dealer is concerned. Prior to that neither there is incidence of tax nor there is levy and therefore the question of assessment of such tax does not arise. In that view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after. A question may arise that in a particular year a person has taxable sales as well as turnover of sales which has taken place outside the State. Aggregating all the three result in exceeding the limit and the question may arise whether the assessee is required to pay tax amount in excess of limit or is not entitled to defer the payment of tax amount which but for inclusion of the amount of 4 per cent on the turnover made outside the State would not have been required to pay. Literally speaking the answer may be yes. However, that "will result in denying the available exemption or levy of tax on sales or purchase outside State, violating inhibitions of article 286. Here comes the role of interpretation of rules. It is trite to say that law which imposes a tax or for that matter burdens the subject must be strictly construed. Unless a subject strictly comes within the four corner of law such law, he cannot be subjected to such burden. Even when it is possible reasonably to have two views the court would lean in favour of such interpretation which favours the subject. Once a levy is lawfully imposed, any exception made thereto has also to be strictly construed to the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that limit further by 4 per cent of the turnover made outside the State can arise. If the limit has been exhausted by availing of the exemption of that year s tax liability determined under the provisions of the Act the question of determining the limit for the future would not arise and the condition that on exceeding monetary limit, exemption under entry 175 shall cease to have effect would come into operation springing to life liability on the part of the assessee to pay tax thenceforth. In my opinion, therefore, at no stage the question about imposition of tax exceeding the one fixed under Act really arise and no issue about the legislative competence really arises on the entire reading of the exemption notification as well as the Government resolution. 48.. It may be pointed out that this distinction between the imposition of liability and legislative Act in working out the ancillaries or the matter incidental thereto has been pointed out in the case of A.V. Fernandez v. State of Kerala reported in [1957] 8 STC 561 (SC); AIR 1957 SC 657. It was a case relating to Travancore-Cochin General Sales Tax Act which was a pre-Constitution law. It has originally included the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the provisions with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The Legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of article 286 of the Constitution, may for the purpose of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer s turnover. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of article 286 of the Constitution and the corresponding provision enacted in the Act." 49.. In my opinion these principles govern the controversy before us also. As noticed above that but for the notification and resolution referred to above the petitioner was liable to pay tax only in respect of his transaction which have taken place within the State in accordance with the Gujarat Sales Tax Act; and under Central Sales Tax Act in respect of the transaction which had taken place in the course of inter-State trade and commerce. That liability has remained unaffected. Neither the said liability has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the words used, whatever might be the consequence. I cannot think that this principle applies, to any considerable extent, where the payment spoken of in the Act of Parliament is a payment to be made in return for services rendered, and above all in a case where Parliament does not step in to give the right to payment, but rather to moderate and limit a right to payment which otherwise might exist without limit, or at all events with only such limits as would be placed upon it by a quantum meriut assessment." 52.. It may be noticed that the Privy Council has drawn a distinction between the payment towards tax liability and moderation or adjustment towards payment which is to be made towards a liability which otherwise might exist without limit. It has been seen above, that the liability to pay tax which must exist before one can ask about exemption is an existence in its full extent but for the operation of the scheme. Once that liability is fixed only the question that remained germane is moderation in discharge of that liability either by exempting a person from making any payment towards it altogether or by discharging of that liability by set-off from other payments made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At the request of the States of Andhra Pradesh, Bombay, Madras, Orissa, Uttar Pradesh, Hyderabad, Madhya Bharat, Patiala and East Punjab States Union (PEPSU) and Saurashtra under article 252(1) of the Constitution. The authorisation was with regard to control and regulation of prize puzzle competitions and other matters consequential and incidental thereto. The question that arose was whether such Act has brought within its sphere of operation competition in which success depended on a substantial degree of skill and if so, whether it was also requested by the respective States requiring the Parliament to legislate in the field covered by the States List. The court first came to the conclusion that enactment by the Parliament in the field reserved for States cannot be beyond the scope of the resolutions made under section 252(1) requiring the Parliament to make law on the subject. It examined the question of severability by assuming that the prize competition as defined in the Act included those games in which success depends to a substantial degree on skill as well as those in which it does not so depend and taking out the former class of case from the purview of subject with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. 217-218. 3.. Even when the provisions which are valid are distinct and separate from those which are invalid, if they all form part of a single scheme which is intended to be operative as a whole, then also the invalidity of a part will result in the failure of the whole. Vide Crawford on Statutory Construction, pp. 218-219. 4.. Likewise, when the valid and invalid parts of a statute are independent and do not form part of a scheme but what is left after omitting the invalid portion is so thin and truncated as to be in substance different from what it was when it emerged out of the Legislature, then also it will be rejected in its entirety. 5.. The separability of the valid and invalid provisions of a statute does not depend on whether the law is enacted in the same section or different section; (vide Cooley s Constitutional Limitations, Vol. 1, pp. 361-362); it is not the form, but the substance of the matter that is material, and that has to be ascertained on an examination of the Act as a whole and of the setting of the relevant provision therein. 6.. If after the invalid portion is expunged from the statute what remains cannot be enforced without making alterations a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and separate from those which are not affected by invalidity and the remainder itself may form a complete code. Therefore, in our opinion, doctrine of severability cannot be applied to the present schemes so as to sustain the balance of the scheme after invalidating the impugned part. 57.. The principles governing doctrine of severability have been reiterated by the Supreme Court in Godrej's case [1992] 87 STC 186. 58.. The learned counsel for the petitioners strongly relied on the decision in the case of Varun Polymol Organics Ltd. v. State of Maharashtra reported in [1995] 97 STC 55 (Bom) in support of its submission that the question for interpretation that the relevant clause in the Bombay Sales Tax Act amounted to imposition of tax on sales made outside the State proceeded from a provision which provided for computation of notional sales tax liability. The relevant clauses which were under consideration read as under: "For the purpose of the above clause, sales made on consignment basis within the State of Maharashtra or branch transfers within the State of Maharashtra shall also be deemed to be sales made within the State exigible to tax'. ................. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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