TMI Blog1996 (7) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... representative facts are, therefore, taken from C.W.J.C. No. 2530 of 1993. 2.. The case of the petitioner is that it is a company registered under the Companies Act, and it is engaged in the business of manufacture of sugar vacuum/pan process. The sugarcane is the principal raw material for the manufacture of sugar by the factory, and such sugarcane is purchased by the petitioner from the farmers and the co-operative societies operating in the area. In the year 1937 the Bihar Sugar Factories Control Act, 1937 (Bihar Act VII of 1937) (hereinafter referred to as the Act of 1937 ) was enacted with a view to regulate the supply, purchase, payment of cane price, etc., in the State of Bihar. The said Act was subsequently declared to be ultra vires, but the Governor of Bihar promulgated the Bihar Sugarcane (Regulation of Supply and Purchase) Ordinance, 1968, which covered the entire field relating to supply, purchase, payment of cane price, regulation of purchase, payment of purchase tax, etc. The first Ordinance being Bihar Ordinance No. 3 of 1968 was followed by successive Ordinances, till it was replaced by an Act of Legislature known as the Bihar Sugarcane (Regulation of Supply a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner-factory. The entire field is controlled by various enactments and orders, and even the minimum price to be paid to sugarcane growers is fixed by the sugar controllers. In the matter of fixation of minimum price of sugarcane the incidence of tax under the Act has not been taken into account. Similar is the case in the matter of fixation of levy price of sugar. The Bihar Finance Act, 1981, replaced the Bihar Sales Tax Act, 1959, and came into force with effect from April 1, 1981 after receiving the assent of the President of India on April 20, 1981. Under section 4 of the Act every dealer who is liable to pay tax under section 3 and who purchases goods in the circumstances in which no sales tax is payable or has been paid on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or sale in the course of inter-State trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on sale price of such goods under section 12. The rate of tax specified under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of sugarcane under the Act would have a ruinous effect on the industry which is already in a bad state. The Assistant Commissioner, Commercial Taxes (respondent No. 2), made an order of assessment and demanded purchase tax on the purchase of sugarcane for the year 1986-87 which the petitioner had challenged before this Court in C.W.J.C. No. 13111 of 1992. During the pendency of the said writ petition the respondents have levied penalty in exercise of power under section 20(1)(a) of the Act for the year 1987-88. The order of assessment and the demand in pursuance thereof for the year 1987-88 dated December 16, 1992 and February 1, 1993 respectively are annexed as annexures 6 and 7 to the writ petition. The petitioner has prayed for quashing of the said orders after holding that the petitioner is not liable to pay the purchase tax under the provisions of the Bihar Finance Act on the purchase of sugarcane. 4.. A counter-affidavit has been filed on behalf of the respondents in which it has been contended that the petitioner is liable to pay purchase tax on the purchase of sugarcane under section 4 of the Act. The mere fact that under section 49 of the Act of 1981 the petitioner is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cripple the industry, the control whereof vests in the Central Government, because that would amount to interference in the domain of Parliament. (e) Assuming that none of the above contentions find favour with the court, it must be held that the rate of tax on the purchase of sugarcane is only 2 per cent under section 13 and not 8 per cent under section 12; (f) The imposition of penalty is not justified in the facts and circumstances of the case merely on the ground that the taxes were not paid on the purchase of sugarcane. The facts do not disclose any dishonest or contumacious conduct on the part of the petitioners, who have all along acted under a bona fide belief that no purchase tax on sugarcane was payable under the Bihar Finance Act. Even the assessing officers shared the same view. 6.. Mr. Rajaram Agarwal, Senior Advocate appearing on behalf of the petitioners in C.W.J.C. No. 2530 of 1993 relied upon several decisions of the Supreme Court in support of the contention that a special law will exclude the applicability of the general law in relation to the same transaction. He submitted that the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, is a speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved area was obliged to offer the cane grown by it to the occupier of the factory for which the area was reserved. Similarly, the occupier or the manager of the concerned factory was required to enter into an agreement in the prescribed form on such terms and conditions as may be prescribed for the purchase of cane offered by the canegrower or cane-growers co-operative society. Under section 21 the Governor after consultation with the Board was authorised to determine in respect of any area the minimum price to be paid by the occupiers of factories for the cane purchased in that area and direct that such minimum price shall be calculated in accordance with rules. Section 22-A vested the State Government with power to vary the minimum price in certain cases. Section 29 of the Act which stood amended with effect from 1st January, 1962 provided as follows: 29. Cess and tax on cane.-The State Government may, by notification, impose- (a) a cess not exceeding fifty-one naye paise per quintal on the entry of sugarcane into a local area specified in such notification, for consumption, use or sale therein; (b) a tax not exceeding fifty-one naye paise per quintal on the purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative societies on the other; and (g) such other matters as may be prescribed. Chapter III of the Act incorporates the licensing provisions authorising the State Government to issue licences for crushing cane in a factory in the form prescribed. Chapter IV of the Act incorporates provisions with regard to purchase and supply of cane and section 32 provides for the declaration of reserved area by the Cane Commissioner after consulting the council concerned and the occupier of the factory or the occupiers of other affected factories. A detailed scheme has been laid down about the manner in which sugarcane was to be offered by the growers to the occupier of a sugar factory. Chapter V provides for the payment of price of cane, and in particular section 42 thereof authorised the State Government after consulting the Board to determine by notification in the official Gazette, in respect of any area, the minimum price of cane payable by the owners of units to the cane-growers or co-operative societies for cane supplied to them in the crushing year concerned. Section 49 of the Act provides for the levy of tax on sugarcane. It reads as follows: 49. Tax on sugarcane.-(1) The St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax imposed under sub-section (1) is paid at the rate per quintal of sugar, notified in the official Gazette, by the State Government and the certificate of payment is obtained from the Cane Officer concerned, the occupier of any factory or any person acting on his behalf or any other person shall not remove sugar from the factory. (8) There shall be paid to the Board and the council as grant, in the manner prescribed, such proportion of the amount realised under sub-sections (3) and (5) in respect of every crushing year as the State Government may, from time to time, determine in his behalf to enable the Board and the council to meet the cost of such schemes of development as may be undertaken by them with the approval of the State Government: Provided that one-fifth of the amount payable under this sub-section shall be paid to the Board and the rest to the council in proportions to the quantities of the cane crushed by the factories concerned. 9.. Such are the schemes of the Act of 1937 and the Act of 1981. The dominant objective of the Act was not to raise revenue for the State. The Acts sought to regulate the production, supply and distribution of sugarcane intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The tax was not intended to raise revenue with a view to augment the State exchequer. Learned Advocate-General appearing for the State submitted that though called tax, it was really in the nature of fee. It is not, however, necessary for me to go into that question for determining the issue. 11.. The Act of 1981 is a legislation referable to entry 27 of the State List. The tax leviable under section 49(1)(a) is really a tax on the entry of goods covered by entry 52 of the State List. But, the tax under section 49(1)(b) is clearly a tax on the sale or purchase of goods covered by entry 54 of the State List. On the other hand, the Bihar Finance Act is indisputably a legislation under entry 54 of the State List. Counsel for the petitioners submitted that the Act of 1981 is a special Act in relation to the Bihar Finance Act and, therefore, the special law must prevail over the general law, and in any event it curtails the operation of the general law so as not to apply to situations covered by the special law. A large number of authorities were cited before us in support of the above proposition. 12.. The first decision of the Supreme Court relied upon by the counsel for the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng land for the Trust the machinery of the Land Acquisition Act as modified was contemplated and that did not exclude the Land Acquisition Act. On the contrary it made it applicable subject to certain modifications and exceptions. In his dissenting opinion, however, K. Subba Rao, J. (as he then was) took the view that Patna Improvement Trust could acquire lands only in the manner provided under the special Act, and not under the Land Acquisition Act, and in that context he observed: The law on the subject is very well-settled and, in my view the learned Judges of the High Court have correctly appreciated it and applied it to the facts of the case. Two principles noticed by the High Court are apposite. The first principle is generalia specialibus non derogant. This principle is exemplified by the decision of the Privy Council in Secretary of State v. Hindustan Co-operative Insurance Society Ltd. AIR 1931 PC 149. The second principle is that if a statute directs a thing to be done in a certain way that thing shall not, even if there be no negative words, be done in any other way. This principle is illustrated by the decision in ex parte Stephens [1876] 3 Ch. D 659. A combined effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions contained in a statutory enactment or in rules/ regulations framed thereunder have to be so construed as to be in harmony with each other and that where under a specific section or rule a particular subject has received special treatment, such special provision will exclude the applicability of any general provision which might otherwise cover the said topic. 14.. Considerable reliance was placed on the decision of the Supreme Court in Ashoka Marketing Ltd. v. Punjab National Bank AIR 1991 SC 855. The aforesaid decision refers to the earlier decisions of the Supreme Court, and it was observed: On such principle of statutory interpretation which is applied to be is contained in the latin maxim: leges posteriores priores conterarias abrogant (later laws abrogate earlier contrary laws). This principle is subject to the exception embodied in the maxim: generalia specialibus non derogant (a general provision does not derogate from a special one). This means that where the literal meaning of the general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether the Act of 1981 and the Bihar Finance Act create distinct liabilities which the petitioners are liable to discharge. If it is found that the tax under the general law is to be paid in addition to the tax under the special law, the question of the special law superseding or curtailing the operation of the general law will not arise. Realising this, Sri Agarwal strenuously urged that double taxation should be avoided as far as possible not on the ground of legislative competence but on the principle of construction. 16.. On the question of double taxation the law appears to be fairly wellsettled by a series of decisions of the Supreme Court. A taxing statute should not be interpretated in such a manner as to cast the burden twice over on the taxpayer unless the language of the statute is compellingly certain. It is not fair to interpret a taxing statute as to impute an intention to the Legislature to go on taxing what is virtually the same product in different forms, over and over again, nor should the same person be taxed twice in respect of the same transaction, unless the Legislature specifically intends it. [See [1972] 83 ITR 92 (SC) (H.H. Prince Azam Jha Bahadur v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it was observed: I have already related the arguments on behalf of the dealer, which, in substance, was that levy of sales tax under the Sales Tax Act as also levy of cess on it under the Control Act amounted to double taxation. The case of the dealer in this respect was that the Control Act would prevail as against the Sales Tax Act in so far as it concerned the levy on the sale of sugarcane. The Commercial Taxes Tribunal, however, held that both the impositions would be valid being authorised under two different entries, namely, entries Nos. 52 and 54 of Schedule VII, State List II, of the Constitution of India. I do not consider it necessary to detain myself in an elaborate discussion on this issue. The law is now settled by the Supreme Court of India in the case of Mathra Prashad and Sons v. State of Punjab [1962] 13 STC 180 (SC); AIR 1962 SC 745 that such double impositions would be valid. That was a case in which a firm of general merchants sold, besides other goods, manufactured tobacco as defined under the Punjab Tobacco Vend Fees Act (12 of 1954) which came into force in the State of East Punjab from 1st of April, 1954. The firm was also a registered dealer under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner challenged the constitutional validity of the said statutes and the levy on the, inter alia, ground of double taxation. Krishna Iyer, J. speaking for the court held: There is nothing in article 265 of the Constitution from which one can spin out the constitutional vice called double taxation (Bad economics may be good law and vice versa). Dealing with a somewhat similar argument, the Bombay High Court gave short shrift to it in Western India Theatres AIR 1954 Bom 261. Some undeserving contentions die hard, rather survive after death. The only epitaph we may inscribe is: Rest in peace and don t be reborn ! If on the same subject-matter the Legislature chooses to levy tax twice over there is no inherent invalidity in the fiscal adventure save where other prohibitions exist We do not find materials in this case to allow the contention to be reborn. The submission is accordingly rejected. Counsel for the petitioners sought to distinguish the Full Bench decision of the Patna High Court in Rajpur Farms Ltd. s case [1972] 29 STC 177; 1972 PLJR 39 that in that case there was a clear distinction between the cess payable under the Act of 1937 and tax payable under the sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which discloses the legislative intendment not to apply the provision of section 4 to purchases of sugarcane which have borne entry tax or purchase tax under the Act of 1981. I have, therefore, no hesitation in coming to the conclusion that the liability to pay purchase tax under section 4 of the Bihar Finance Act is in addition to the liability to pay entry tax or the purchase tax under the Act of 1981. The submission that section 4 should be so interpreted as to avoid incidence of double taxation must be rejected. 18.. This takes me to a consideration of the submission urged by Mr. Agarwal that on a fair interpretation of section 4 of the Bihar Finance Act, no purchase tax is payable by the petitioners in respect of sugarcane purchased by them for which tax had been paid under the Act of 1981. Section 4 of the Bihar Finance Act reads as follows: 4. Levy of purchase tax.-Subject to the provisions of sections 5, 6 and 7 of this part, every dealer liable to pay tax under section 3, who purchases goods in circumstances in which no sales tax is payable or has been paid on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same was brought in by an amendment by Act 11 of 1973. Under the amended law it was open to the State Government to notify the commodities on which purchase tax was leviable. However, sugarcane was not a commodity so notified. The liability to pay purchase tax has been created for the first time by section 4 of the Bihar Finance Act 1981. He has urged two main submissions in support of his contention that section 4 of the Bihar Finance Act is not attracted to the purchase of sugarcane by the petitionerscompanies. He firstly submitted that there were two conditions precedent which must be fulfilled before the purchase tax could be levied under section 4 of the Bihar Finance Act. Firstly, the purchase should be in circumstances in which no sales tax is payable and secondly that no sales tax has been paid on the sale price of such goods. He submitted that the first condition was fulfilled. The second condition was not fulfilled inasmuch as purchase tax, which is same as sales tax, has been paid by the petitioners on the sugarcane purchased by them under the provisions of the Act of 1981. The second submission is that the words such goods used in the latter part of the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1985 SC 660 (K. Ramanathan v. State of Tamil Nadu) he submitted that the same word may be used in two different sense in the same section. It is not possible to interpret the provision in the manner commended by the learned counsel. Section 4 of the Bihar Finance Act is concerned with the levy of purchase tax. The goods purchased must mean sugarcane in the instant cases and when the section uses the words such goods , it refers to such goods purchased, namely, sugarcane. If no tax is either payable or paid on such sugarcane, and the sugarcane is consumed in the manufacture of other goods, such as sugar, purchase tax is leviable on the purchase price of the sugarcane. The section clearly distinguishes between the raw material, namely, sugarcane and the finished product, namely, sugar by using different words. Use of the words and either consumes such goods in the manufacture of other goods for sale itself discloses that the manufactured product is described as other goods . Obviously, therefore, in the latter part of the section wherever the words such goods are used, it must refer to sugarcane and not sugar. Counsel submitted that if such goods referred to the raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Essential Commodities Act under which Sugarcane (Control) Order, 1966 was issued fixing the price of sugar. Similarly Sugarcane Control Order was passed. With a view to equitable distribution of sugar and its availability at fair prices the proportion of levy sugar and free sale sugar was fixed. The free sale sugar provides the cushion for neutralising the loss incurred on levy sugar and the liability incurred by way of heavy taxation. He submitted that in all other States purchase tax was levied at the rate of only one rupee per quintal, but in the State of Bihar it comes to Rs. 3.75. If purchase tax is payable on sugarcane at the rate of 8 per cent together with surcharge, about 10 per cent will have to be paid by way of purchase tax on the value of the sugarcane purchased by the sugar mills. This will only increase the cost of raw material and will consequently increase the cost of production of sugar. This increased cost of production is not taken into account while fixing the proportion between levy sugar and free-sale sugar. In the State of Bihar additional market fee at the rate of one per cent is charged. With such heavy taxes, the factories which may otherwise earn profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitions, and nothing said in the foregoing paragraphs should be understood to imply that this Court has found as a fact that the levy of purchase tax has a crippling effect on the sugar industry. The matter requires much deeper consideration than what is possible in a writ proceeding, because the profitability of the sugar industry is dependent upon so many other factors. If the argument advanced by counsel for the petitioners is accepted, the workmen of the industry cannot demand a hike in wages nor can the Electricity Board impose a higher tariff for supply of electrical energy. In any event, these are matters for the Legislature and the State Government to consider while framing taxation policy of the State. 23.. It was then submitted that the Union of India has passed a law, known as the Additional Duties of Excise (Goods of Special Importance) Act, 1957, under which additional duty has been levied on the goods described in column (3) of the First Schedule which includes sugar. Under section 4 of the Act during each financial year, there shall be paid out of the Consolidated Fund of India to the States in accordance with the provisions of the Second Schedule such sums, repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on sugar, tobacco and mill-made textiles, and to distribute the net proceeds of these taxes, except the proceeds attributable to Union territories, to the States. The States which levy a tax on the sale or purchase of these commodities after 1st April, 1958 do not participate in the distribution of net proceeds. 24.. From the material placed before us it appears that on the recommendation of the Inter-State Council and the Finance Commission the aforesaid Act had been passed with a view to distribute the collection of additional excise duty to the participating States, who do not levy sales tax or purchase tax on the specified commodities including sugar. It cannot be disputed that the said Act is referable to entry 84 of List I of the Seventh Schedule. In any event the said Act has not been enacted in exercise of legislative authority that may be conferred under article 252 of the Constitution of India. It is not the case of the petitioners that the said Act was passed by the Parliament legislating for two or more States by consent on a matter with respect to which the Parliament had no power to make laws for the States. It is also not the case of the petitioners that the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Union with a view to derive benefit as promised, but it is equally open to the States not to accept the benefit, and to legislate independently on subjects included in List II of the Seventh Schedule. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 cannot, therefore, curtail or abrogate the competence of the State Legislature to enact laws under entry 54 of List II imposing taxes on the sale or purchase of goods. It is also apparent from a mere perusal of the Act that if a State decides to impose sales tax or purchase tax on the special commodities mentioned in the Schedule to the Act, it forfeits its right to share in the net proceeds of the additional duties levied and collected under the said Act. The writ jurisdiction of this Court cannot be invoked to compel the State of Bihar to share the benefit under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Moreover, the goods specified under the First Schedule of the said Act is sugar, whereas purchase tax is levied under section 4 of the Finance Act on the purchase of sugarcane, which is quite distinct from sugar. 25.. It was then submitted that heavy imposition of sales/pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factories have earned nominal profits in the State of Bihar. With the levy of purchase tax they may now incur losses year after year. It was, therefore, submitted that imposition of purchase tax is confiscatory in nature and violative of article 19(1)(g) of the Constitution of India. The proposition so broadly states is not acceptable. There may be several reasons for the sugar factories not performing well in the State of Bihar. It is not necessary for us to enumerate the large number of factors which may affect the working of a sugar factory. The loss of profitability or the incurring of losses may be on account of the general economic climate prevailing in the State or may be on account of labour problems or on account of lack of funds, or even on account of managerial inefficiency. It is not for this Court to speculate as to why the sugar factories in the State of Bihar have not been doing well, though in some other States their performance has been commendable. We cannot jump to the conclusion that if purchase tax is levied on purchase of sugarcane by the sugar mills, that by itself will result in the closure of all sugar mills, as they are not in a position to meet the liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs was either dishonest or contumacious. The petitioners acted under a bona fide belief that having paid purchase tax under the Act of 1981, they were not required to pay purchase tax once again under the Bihar Finance Act. The petitioners have referred to several orders of the assessing authorities who themselves did not impose purchase tax under the Bihar Finance Act, because they also understood section 4 in the same manner as understood by the petitioners. It was, therefore, submitted that imposition of penalty be quashed. 29.. Against the imposition of penalty the petitioners have remedy under the Bihar Finance Act. It is true that penalty should not be imposed as a matter of course. However, in the absence of any material before us, and in the absence of such plea being raised before the assessing authorities, it would not be prudent to investigate this aspect of the matter in writ proceeding. The petitioners may seek their remedy under the provisions of the Bihar Finance Act before the appropriate authorities. 30.. I, therefore, find no merit in the writ petitions, and the same are, accordingly, dismissed. However, this will not preclude the petitioners from moving the a ..... 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