9911796707
TMI Blog1995 (8) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... of levy and collection of tax which is in existence in all the countries of the world from the days of known history. In India also, the existence and inception of system of taxation is referred to by Manu in his Manusmriti which prescribes how a duty is to be imposed on the transaction of sales. Manu even acknowledged the existence of sales tax as did Kautilya also. Meagasthenes a renowned traveller to India has also referred to the existence of such a tax. After the first world war, the sales tax was first visualised in the Report of the Taxation Enquiry Committee (1924-25). In this background and with the development of concept of sales tax in the rest of the world, entry in the Government of India Act No. 48 was made proposing the imposition of sales tax. However, relevant provisions were made for the imposition of sales tax in the Constitution of India, 1950. It is unfortunate that tax laws in our country are technically couched making their interpretation difficult. The language used in the fiscal laws is such the wriggling out of which is left to the wisdom of few. It has been acknowledged by all concerned that the most difficult law in the country to be interpreted is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy." Schedule D of the State Act prescribes the point of levy of tax on paddy as the first sale within the State by a dealer liable to pay tax when imported from outside, and the stage of levy is last purchase within the State by a dealer liable to pay the tax when such purchase of paddy is made within the State. The Assessing Authority held the petitioners not liable to pay any purchase tax under the State Act. The Assessing Authority created a demand of "nil" and the petitioners after making various adjustments of refund due to it deposited the balance to square up the demand. The Deputy Excise and Taxation Commissioner (Inspection)-cum-Revisional Authority, Karnal, issued a notice under section 40 of the Act proposing to take suo motu action in respect of the adjustments allowed under section 15A of the Act for the purchase value of paddy worth the amount mentioned in the notice, the rice procured out of which had been sold in the course of export outside India. It is contended that the petitioners enjoyed the exemption under section 9 of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 6 read with section 17 and Schedule "D" of the State Act. Paddy is subject to tax at the last purchase in the State by the dealer liable to pay tax and rice is taxable at the stage of first sale under section 6 read with section 17 and Schedule D of the State Act. Section 5 of the Central Act is stated to be applicable only to those goods mentioned in the Schedule which are sold outside the territory of India. Section 5(3) of the Central Act lays down that notwithstanding anything contained in sub-section (1) of section 5, last sale or purchase of goods preceding the sale or purchase occasioning export of goods out of the territory of India shall also be deemed to be in the course of such export if such sale or purchase takes place after, and was for the purpose of complying with the agreement or order for or in relation to such export. Relying upon various judgments, it is submitted that if the purchase is of same goods which were later on exported out of the territory of India then such purchase is exempt but if the goods are purchased at a different place than outside the territory of India they are liable to be taxed under the local Act and in that case the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be in force in the State of Haryana as well till the new Act was incorporated on May 5, 1973. This Act was also amended on various occasions according to the needs, requirements and necessities felt. Section 2 of the State Act deals with various definitions including the definition of dealer, trade, declared goods, export, goods, import, purchase, sale, turnover and like. Chapter II prescribes the taxing authority and the Tribunal. Section 3 authorises the State to appoint a person to be Commissioner and such other persons to assist him as are thought fit. The Commissioner has the jurisdiction over the whole of the State and exercises all powers conferred and perform all duties imposed on him by or under the Act. Section 4 deals with the constitution of Tribunal which consists of one Member to be appointed by the State Government for the purpose of performing such functions and exercising such powers as may be assigned to or conferred on, the Tribunal by or under the Act. Sections 6 to 18 deal with incidence and levy of tax. Chapter IV provides for compulsory registration of dealers liable to pay tax and Chapter V deals with return, assessment, reassessment and collecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two constructions of certain words or terms are possible the court should lean in favour of the construction which give relief to the citizen. It was further contended that section 9 of the Act was a special provision and section 17 was not the charging section. Mr. M.L. Verma, Advocate, appearing for another group of assessees adopted most of the arguments of Shri Raja Ram Aggarwal and elaborated the submissions regarding section 17 of the Act being not the charging section. His emphasis was that section 6 of the State Act was the only charging section and that the impugned sections were violative of various provisions of the Constitution. In reply, Mr. Arun Nehra, submitted that section 9 was not applicable in the case of the petitioners and even if the same is held to be applicable that did not absolve the petitioners from liability to pay the tax. According to him, sections 6, 9, 15A and 17 are the charging sections. He has submitted that exemption from payment of tax cannot be presumed as the same is required to be specific and inambiguous. According to him various sections under the Act specifically deal with the exemption and such sections do not deal with the exemptions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature and not in the executive or the judiciary. Tax cannot be equated with fee or other contributions. Sales tax is a tax which includes within its scope and business as well as all tangible personal property at either the retailing, wholesaling or manufacturing stage with the exceptions noted in the taxing law. Purchase tax is a tax imposed on the purchase of goods which is imposed at the time of acquisition of such goods for cash or deferred payments or other valuable consideration otherwise than under the circumstances enumerated in the statute providing for the imposition of such purchase tax. Generally speaking a sales tax is a tax levied on the occasion of sale while purchase tax is a tax levied on the occasion of purchase. The transactions which involves sale by somebody necessarily involves purchase by some other person. Sale and purchase are merely different ways of looking at the same transaction from different angle of the persons concerned. Sales tax statutes are broadly divided into two classes, i.e., one levying multiple-point tax and the other single point tax in the series of transaction. In some States, particularly in Bombay, double point system was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, yield to the temptation of seeking ambiguity when there is none". The four rules of interpreting the statute as prescribed by the Supreme Court in this case are: "The first of these is that statutory provisions creating substantive rights or taking away substantive rights are ordinarily prospective; they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective; and the retrospective operation will be limited only to the extent to which it has been so made by express words, or necessary implication. The second rule is that the intention of the Legislature has always to be gathered from the words used by it, giving to the words their plain, normal, grammatical meaning. The third rule is that if in any legislation, the general object of which is to benefit a particular class of persons, any provision is ambiguous so that it is capable of two meanings, one which would preserve the benefit and another which would take it away, the meaning which preserves it should be adopted. The fourth rule is that if the strict grammatical interpretation gives rise to an absurdity or inconsistency such interpretation should be disca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute for the purpose of interpreting it in consonance with the intention of Legislature. In the context of scope, aim and object of the taxing statute and the rules of interpretations, as noted hereinabove, let us now examine the submissions of the petitioners testing them on the touch-stone of the aforesaid legal propositions. It has vehemently been argued that as section 9 of the Act gave the petitioners exemption from payment of the purchase tax, the respondents could not initiate action for its recovery. The petitioners have claimed exemption from payment of purchase tax on the plea of implied exemption granted by section 9 of the Act, on the paddy purchased for the purpose of husking paddy exported out of the country. They have relied upon the judgments of the Supreme Court in Hotel Balaji's case [1993] 88 STC 98 (SC); AIR 1993 SC 1048, Murli Manohar's case [1991] 80 STC 79 and Jagajit Sugar Mills case [1995] 96 STC 344; (1995) 109 PLR 307 in support of their contention. In reply it has been submitted that the aforesaid section was omitted firstly by Ordinance No. 2 of 1990 dated October 15, 1990 and subsequently by Act No. 4 of 1991 dated April 16, 1991 by making c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the power to impose incometax with retrospective operation even for a period prior to the Constitution. The position will be the same as regards laws imposing tax on sale of goods. In M.P.V. Sundararamier Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC); [1958] SCR 1422, this Court had occasion to consider the validity of a law enacted by Parliament giving retrospective operation to laws passed by the State Legislatures imposing a tax on certain sales in the course of inter-State trade. One of the contentions raised against the validity of this legislation was that, having regard to the terms of article 286(2), the retrospective legislation was not within the competence of Parliament. In rejecting this contention, the court observed: 'Article 286(2) merely provides that no law of a State shall impose tax on inter-State sales "except in so far as Parliament may by law otherwise provide". It places no restrictions on the nature of the law to be passed by Parliament. On the other hand, the words "in so far as" clearly leave it to Parliament to decide on the form and nature of the law to be enacted by it. What is material to observe is that the power conferred on Parliame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was passed." It, however, cannot be denied that every statute is prima facie presumed to be prospective unless it is expressly or by necessary implication made to have retrospective operation. If the words in the statute are sufficient to show the intention of the Legislature, no other meanings can be assigned by the courts to hold otherwise. In Jawaharmal v. State of Rajasthan AIR 1966 SC 764, the Supreme Court reiterated the position and held as under: "It is well-recognised that the power to legislate includes the power to legislate prospectively, as well as retrospectively, and in that behalf, tax legislation is no different from any other legislation. If the Legislature decides to levy a tax, it may levy such tax either prospectively or even retrospectively. When retrospective legislation is passed imposing a tax, it may, in conceivable cases, become necessary to consider whether such retrospective taxation is reasonable or not. But apart from this theoretical aspect of the matter, the power to tax can be competently exercised by the Legislature either prospectively or retrospectively........... " If the object of an amending statute is to remove and rectify the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings relating to levy of penalties and recovery thereof. The scope of the power of a Legislature to make a law validating the levy of a tax or a duty retrospectively was considered by this Court in Chhotabhai Jethabhai Patel and Co. v. Union of India AIR 1962 SC 1006; [1962] Supp 2 SCR 1. The court held that Parliament acting within its legislative field had the power and could by law both prospectively and retrospectively levy excise duty under the Central Excises and Salt Act, 1944, even where it was established that by reason of the retrospective effect being given to the law, the assessees were incapable of passing on the excise duty to the buyers. After considering certain American decisions, Ayyangar, J., observed (at page 37 of SCR); (at pages 1022-23 of AIR) thus: 'It would thus be seen that even under the Constitution of the United States of America the unconstitutionality of a retrospective tax is rested on what has been termed 'the vague contours of the 5th Amendment'. Whereas under the Indian Constitution the grounds on which infraction of the rights to property is to be tested not by the flexible rule of 'due process' but on the more precise criteria set out in art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 to July 31, 1961, i.e., till the date on which an Ordinance which was replaced by the validating Act in question came into force, should be deemed to have been commenced and conducted in accordance with the provisions of the validating Act and if not already completed should be continued and completed in accordance with the validating Act was opposed to article 304(b) and article 19(1)(f) and (g). It was urged in that case on the basis of the observation made in Sutherland on "Statutes and Statutory Constructions" to the effect that: "Tax statutes may be retrospective if the Legislature clearly so intends. If the retroactive feature of a law is arbitrary and burdensome the statute will not be sustained." That the length of retrospectivity, that is, eleven years was an unreasonable restriction on the rights guaranteed under article 19(1)(f) and (g). This contention was rejected by this Court at pages 915 and 916 of SCR (at pages 1674 of AIR) of the Report as follows: "We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. It is conceivable that cases may arise in which the retrospective operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statutes while dealing with the construction to prevent evasion or abuse, states: "This manner of construction has two aspects. One is that the courts, mindful of the mischief rule, will not be astute to narrow the language of a statute so as to allow persons within its purview to escape its net. The other is that the statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised in the hope of thereby falling outside the Act. When the courts find an attempt at concealment, they will, in the words of Wilmot, C.J., 'brush away the cobweb varnish, and show the transactions in their true light'." In Rai Ramkrishna v. State of Bihar [1963] 50 ITR 171; AIR 1963 SC 1667, a Constitution Bench of the Supreme Court had observed: "Where the Legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law but it can also provide for the retrospective operation of the said provisions." In a recent judgment the Supreme Court in Entertainment Tax Officer-1 v. Ambae Picture Palace [1995] 96 STC 338 has held: "If the Parliament or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of manufactured goods except those specified in Schedule B, subject to the conditions and exceptions specified therein, or when the tax leviable on the sale of manufactured goods is less than the tax paid in the State on the sale or purchase of goods, other than the tax paid on the last purchase of paddy, cotton and oil seeds, used in their manufacture, the full amount of tax paid or the excess amount of tax paid over the tax leviable on sale, as the case may be, shall be refundable if the manufactured goods are sold in the State or in the course of inter-State trade or commerce or in the course of export out of the territory of India: Provided that in case the manufactured goods have been sold before the 1st day of January, 1988, the tax paid on goods, leviable to tax at the first stage of sale under section 18, used in their manufacture, shall not be refunded." The provisions of section 15A of the Act specifically mention that taxable goods, persons and the events which make the section charging section. It was held in Adarsh Industrial Corporation v. State of Haryana [1990] 79 STC 94 (P H) that the requirements of the charging section are: 1.. that the commodity to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and section 9 was valid yet the Supreme Court of India in the case of M/s. Goodyear India Limited, Faridabad has held, inter alia, that the taxable event is the despatch of goods and not the purchase of goods and the State is not legislatively competent to enact such provisions. In other words the honourable Supreme Court struck down the provisions of section 9(1)(b) and section 24(3) of the Act ibid. In order to remove the lacuna pointed out by the Supreme Court and to remove any doubt and ambiguity, the Haryana General Sales Tax Act, 1973 was amended-vide Act No. 1 of 1990, and subsequently by an Ordinance dated 12th October, 1990 and the taxable event was shifted to the purchase of goods itself. However, in another decision, in the case of M/s. Murli Manohar Co. v. State of Haryana** the Supreme Court has, in effect, held that the amendment carried out-vide Act No. 1 of 1990 does not still empower the State Government to levy purchase tax on certain specified transactions. The Supreme Court held that the definition of turnover and the provision for right to purchase goods without payment of tax given in the Act do not permit the charging of purchase tax as the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance, 1990. The modification in the provisions of Ordinance and the Bill has to be made in view of the changed circumstances. Moreover, it was the need of the hour to achieve the objects'' A perusal of the Statement of Objects and Reasons, Statement of Financial Memorandum and the Memorandum explaining the reasons for modification of the provisions of Ordinance No. 2 of 1990, unambiguously shows that the Legislature intended to plug the holes to prevent escaping tax liability and imposition of purchase tax despite the judgment of the Supreme Court in Murli Manohar's case [1991] 80 STC 79. The legislative competence of the State Legislature to enact and amend the State Act has in fact been conceded. Otherwise also in view of the provisions of article 246 read with article 286, entry No. 54, List II of the Seventh Schedule of the Constitution of India, the authority of the State Legislature to enact laws with respect to imposition of sale and purchase tax on paddy can neither be disputed nor denied. The learned counsel appearing for the petitioners have vainly tried to urge that the amended provisions of section 15A of the Act were unconstitutional being discriminatory. It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the attack of unconstitutionality. In Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills AIR 1968 SC 1232 the Supreme Court held that the powers conferred by section 150 of the Delhi Municipal Corporation Act on the corporation to levy any of the optional taxes by prescribing the maximum rates of tax to be levied; to fix class or classes of persons or the description or descriptions of articles and properties to be taxed and to lay down the system of assessment and exemptions if any, to be granted is not unguided and cannot be said to amount to excessive delegation. To the same effect is the judgment of the Full Bench of the Jammu and Kashmir High Court in Glacier Cold Storage Ice Mills v. Assessing Authority, Sales Tax [1974] 34 STC 426. The learned counsel for the petitioners appeared to have half-heartedly challenged the vires of alleged offending sections to be unconstitutional and did not refer to any vice which could persuade us to declare the section as ultra vires. The learned counsel for the respondents have submitted and we agree that the exemption contemplated by the statute must be specific and unambiguous. Such exemption can als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them is both a charging as well as exempting provision. In projecting their view point, the petitioners have tried to build their castle on the foundation of the judgments of the Supreme Court reported in Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98; AIR 1993 SC 1048 and Jagatjit Sugar Mill's case [1995] 96 STC 344; [1995] 109 PLR 307. In order to appreciate the submissions made on behalf of the petitioners, it is necessary to examine the main attributes of charging section and the principles regulating the exemptions. The main attributes of the charging section are: (a) that the commodity to be taxed must be specified; (b) the circumstances under which the tax is required to be imposed should be spelt out; and (c) the stage of levy of tax and the person liable to pay tax must have been defined. To seek the benefit of exemption, the principle to be kept in mind is that exemption claimed must be shown to be specific and should not be inferred by the implication unless such implication is implicit and subject to no doubt. The heading of section 9 of the State Act is, "Liability to pay purchase tax". This section was amended firstly by Amendment Act No. 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the coming into force of the provisions of the section. A dealer is not liable to pay such tax if he deals exclusively in goods specified in Schedule "B". This section also provides the quantum, stage and method of paying the tax. Section 15 of the Act provides the rate of tax as under,"(a) twenty paise in a rupee in the case of liquor (foreign liquor and Indian made foreign liquor) specified at serial number 25 of Schedule A and (twelve paise) in a rupee in the case of other goods specified therein; and (b) eight paise in a rupee in the case of other goods; as the State Government may, by notification direct." Section 15A of the Act deals with adjustment and refund of taxes. Section 17 of the Act provides: "Tax on declared goods.-Tax on declared goods shall be leviable and payable at the stage of sale or purchase, as the case may be, and under the circumstances specified against such goods in Schedule D: Provided that where the goods have been subjected to tax at any of the stages of sale or purchase specified in Schedule D, the tax shall be levied on and paid by a dealer liable to pay tax under this Act at the stage of last purchase of such goods by him: Provided fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere raw materials are purchased and used inside the State for the manufacture of finished goods which are then simply, and without any sale, despatched-rather, consignedoutside the State. There is, however, nothing unconstitutional about the two other consequences that flow on the language of section 9(1)(b); one express and the other implied; one in favour of the Revenue and the other in favour of the assessee, viz., (1) that there will be a tax on the purchase of the raw materials if the manufactured goods are disposed of in the State itself otherwise than by way of sale; and (2) that there will be no tax on the purchase of the raw materials if the manufactured goods are despatched from the State consequent on (i) a local sale, (ii) an inter-State sale, or (iii) a sale in the course of export. These two aspects of section 9(1)(b) survive even after the judgment of the Supreme Court in Goodyear's case [1990] 76 STC 71." When minutely examined, the judgment reveals that the honourable Supreme Court had dealt only with the charging part of the section and referred the circumstances under which the tax was to be imposed. The circumstances were spelt out as "consequences that flow o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed and the other implied, one in favour of the Revenue and the other in favour of the assessee. Referring to the provisions of section 9 of the Act, it was observed: "As pointed out above, section 9(1) is both charging and exempting section." In Murli Manohar's case [1991] 80 STC 79, the Supreme Court considered, explained and referred to the law laid down in Goodyear's case [1990] 76 STC 71 (SC). However, in Hotel Balaji's case [1993] 88 STC 98 (SC), the earlier decision of the Supreme Court in Goodyear's case [1990] 76 STC 71 was overruled. In Hotel Balaji's case [1993] 88 STC 98, the Supreme Court examined the constitutionality of the Gujarat Sales Tax Act, U.P. Sales Tax Act and Andhra Pradesh General Sales Tax Act. The assessee had relied upon the decision of the Court in Goodyears' case [1990] 76 STC 71 (SC), whereas the counsel appearing for Revenue had challenged the correctness of the said decision and pleaded for its reconsideration. Upon reference, the matter pertaining to other States arising, inter alia, the question relating to the ratio of Goodyear's case [1990] 76 STC 71 (SC), were also considered. The court, however, indicated that they shall confine their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to what was the position of taxation in either of the aforesaid two statutes. The point in issue was summarised, "the question is whether the levy of tax is on the purchase of goods or on the consignment of manufactured goods". The Supreme Court held that levy created by the said provision is a levy on the purchase of raw material purchased within the State which is consumed in the manufacture of other goods within the State. If the manufactured goods are sold within the State, no sales tax is collected on the raw material, evidently because the State gets larger revenue by taxing the sale of such goods. 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 the tax is to be paid on the purchase value of the raw material the reason that the manufactured goods are disposed of otherwise than by sale out of the State, the State does not get any revenue because no sale of manufactured goods takes place within the State. In such a situation, the State was presumed to have retained the levy and collect it and there was no reason for waiving the purchase tax in these two situations. It was noticed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een substituted with retrospective effect. We have not referred to those provisions in this part, for the reason that we are concerned only with the reasoning in Goodyear's case [1990] 76 STC 71 (SC)." It would thus be clear that exemptions under section 9 were presumed without determining the contentions as raised on behalf of the State before us and the view point of the State was not properly projected as the honourable Supreme Court in that case was mainly concerned with the sales tax of three States, namely, Gujarat, Uttar Pradesh and Andhra Pradesh. In Jagatjit Sugar Mills v. State of Punjab [1995] 96 STC 344 (SC), the Supreme Court considered the object and purpose of section 4-B of the Punjab General Sales Tax Act, 1948 and found it to be analogous to the provisions of section 9 of the Haryana General Sales Tax Act. On that case, the plea of the petitioner was that for the purpose of manufacturing sugar they purchase sugarcane from cane growers and co-operative societies and as sugarcane being an agricultural produce was exempt from the payment of sales tax within the meaning of section 6 read with Schedule "B" and because the said sugarcane was sold to the petitioneril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. This article empowers the Supreme Court to declare the law in the course of its functions of interpreting a legislation. Such a power is contemplated to bring law in harmony with the special changes (V.D. Dhanwatey v. Commissioner of Income-tax [1968] 68 ITR 365 (SC); AIR 1968 SC 683). It was held in Municipal Committee, Amritsar v. Hazara Singh AIR 1975 SC 1087 that every statement contained in a judgment of the Supreme Court would attract the provisions of article 141 of the Constitution. Statements on matters other than law have no binding force. Similarly in Gurcharan Singh v. State of Punjab 1972 FAC 549 and Prakash Chandra Pathak v. State of Uttar Pradesh AIR 1960 SC 195, it was held that as, on facts, no two cases could be similar, the decisions which are essentially on questions of facts could not be relied upon as precedents for decision of the other cases. The Supreme Court in Lakshmi Shanker Srivastava v. State (Delhi Administration) AIR 1979 SC 451, held that the judgment proceedings on concession and not on any analysis or examination of the relevant provisions cannot be held to be declaring the law within the meaning of article 141 of the Constitution. In order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate court or to the right of a Judge of the High Court to disregard a decision of the Court of Appeal'. It is needless to add that in India under article 141 of the Constitution, the law declared by the Supreme Court shall be binding on all courts within the territory of India and under article 144 all authorities, civil and judicial, in the territory of India shall act in aid of the Supreme Court." In Shama Rao v. Union Territory of Pondicherry [1967] 20 STC 215 (SC); AIR 1967 SC 1480, it was held that, "it is trite to say that a decision is binding not because of its conclusion but in regard to its ratio and the principle laid down therein". In Shenoy Co. v. Commercial Tax Officer [1985] 60 STC 70; (1985) 2 SCC 512, the Supreme Court held that no one can be permitted to urge that the judgment of the apex Court would not be applicable in case of a person who was not a party before that court. Their Lordships held that in a case where numerous petitions are disposed of by a common judgment, aggrieved party can file one appeal and the other parties cannot be heard to say that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to limit the powers of the apex Court under article 142(1) is unsound and erroneous. In both Garg's case AIR 1963 SC 996 as well as Antulay's case AIR 1988 SC 1531, the point was one of violation of constitutional provisions and constitutional rights. The observations as to the effect of inconsistency with statutory provisions were really unnecessary in those cases as the decisions in the ultimate analysis turned on the breach of constitutional rights. We agree with Shri Nariman that the power of the court under article 142 in so far as quashing of criminal proceedings are concerned is not exhausted by section 320 or 321 or 482 Criminal Procedure Code or all of them put together. The power under article 142 is at an entirely different level and of a different quality. Prohibitions or limitations or provisions contained in ordinary laws cannot, ipso facto, act as prohibitions or limitations on the constitutional powers under article 142. Such prohibitions or limitations in the statutes might embody and reflect the scheme of a particular law, taking into account the nature and status of the authority or the court on which conferment of powers-limited in some appropriate way-is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared to be non-compoundable, then it is against public policy to compound it, and any agreement to that end is wholly void in law'.....and submitted that court 'cannot make that legal which the law condemns'. Learned Attorney-General stressed that the criminal case was an independent matter and of great public concern and could not be the subject-matter of any compromise or settlement. There is some justification to say that statutory prohibition against compounding of certain class of serious offences, in which larger social interests and social security are involved, is based on broader and fundamental consideration of public policy. But all statutory prohibitions need not necessarily partake of this quality. The attack on the power of the apex Court to quash the crucial proceedings under article 142(1) is ill-conceived but the justification for its exercise is another matter." In view of this judgment referred to the judgment of the Supreme Court in S.L.Ps. (C) Nos. 4208-09 of 1993 shall be made at the appropriate time to determine as to whether any direction was given or order passed by their Lordships in terms of article 142 of the Constitution. In Kausalya Devi Bogra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roversy before the court and not merely an obiter dictum; (4) even if an obiter of the Supreme Court is required to be given due respect and considerable weightage, the judgment of the Supreme Court upon concession, on facts, has no binding force; (5) the law laid down, judgment delivered and the order passed by the Supreme Court are of binding nature on all the courts in the country including the High Court; and (6) the judgment of the co-ordinate Benches should not be commented upon or decided as appellate court by another such Benches. As earlier noted in the aforesaid judgments of the Supreme Court in Hotel Balaji's case [1993] 88 STC 98 and Murli Manohar's case [1991] 80 STC 79, the Supreme Court made reference to the provisions of the Act while interpreting the law to other States. Such observations or contentions made or noted in the judgment of the Supreme Court while interpreting the provisions of the law pertaining to other States may not be deemed finally decided as admittedly the Haryana Act was not called upon to be adjudicated. The judgment proceeding on concessions whether implicit or implied and admittedly not on analysis or examination of the relevant pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut challenging the vires of interest imposing provisions. Sub-section (5) of section 25 of the Act provides: "(5) If any dealer as mentioned in sub-section (2) fails to pay the tax due as required by sub-section (3), he shall be liable to pay in addition to the tax due simple interest on the amount due at one per centum per month from the date commencing with the date following the last date for the submission of the return under sub-section (2) for a period of one month and at one and a half per centum per month thereafter during the period he continues to make default in the payment: Provided that where the amount of tax not paid as required under subsection (3) does not exceed five hundred rupees, the interest payable thereon shall not exceed the amount of the tax not so paid: Provided further that for the purposes of calculation of interest, a period of fifteen days or more shall be deemed to be one month and the amount of fifty rupees or more shall be deemed to be one hundred rupees and a period of less than fifteen days and an amount of less than fifty rupees shall be ignored." Elaborating the arguments it is contended that as admittedly the petitioners were nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la fidely in depositing the tax within the time contemplated under section 25 and thus incurred any liability to pay interest under sub-section (5) of the aforesaid section. It is true that the sales tax is the biggest source of revenue for a State and it is for the authorities under the Act to decide as to how and in what manner such revenue would be realised. Provision for payment of interest in case of default in payment of tax is a mean of compelling the assessee to pay the tax due within the time prescribed by the State. It is, however, equally true that a citizen cannot be compelled to pay penalty in the form of interest for alleged non-payment of sales tax when the liability to pay the tax itself was bona fidely in dispute and the authorities were not clear about the liability of the assessee Neither the defaulting taxpayer can be given any benefit under the technicalities of law nor the State can be permitted to burden the bona fide assessee with the liability to pay the interest in case of default in the payment of the tax, the liability of which is itself in doll drums. Lord Dunedin in Whitney v. Commissioners of Inland Revenue [1926] AC 37, noted the following three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... napurna Biscuit Manufacturing Co. v. State of Uttar Pradesh [1982] 50 STC 56 (All.), where a dealer was found to have calculated the tax payable by him at the relevant turnover in consonance with the decision of the authorities, it was observed that he could not be held to have calculated the tax wrongly The court further held: "..........It, therefore follows that where a dealer calculates the tax payable by him in accordance with the prevailing interpretation on the subject, it would not be possible to say that the same is not the tax payable under the Act. So long as the calculation is in accordance with the Act the dealer cannot be fastened with liability for interest on any amount found in excess due to change in law or its interpretation. The liability to pay as a result of the order passed by the authorities is not the same thing as the calculation of tax payable by the dealer. Any amount found due apart from it either due to amendment in law or change of view is amount in excess and cannot be considered to be tax admittedly payable for purposes of section 8(1) of the Act. So long as the calculation is honest and fair the dealer shall not incur any liability to pay interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Orissa Sales Tax Act and held that the liability to pay the penalty did not arise merely upon the proof of default in registering a dealer. It was further held, "that penalty will not ordinarily be imposed unless the party obliged either acted deliberately or in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will also be not imposed merely because it is lawful to do so." Under sub-section (5) of section 25 of the Act, the Legislature is clearly shown to have envisaged the circumstances under which the assessee could be directed to pay interest on the amount of tax. Such a liability can be fastened only where the assessee is shown to have attempted to contravene the provisions of the Act with the object to evade payment of rightful tax levied thereunder. It is well-recognised now that the provisions regarding imposition of penalty or interest are to be construed within the term and language of the statute and interpreted as it stands. In case of doubt, the interpretation is required to be made in a manner which is favourable to the taxpayer. If the court comes to the conclusion that languag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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