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TMI Blog2001 (9) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1992. A copy of this notification is at annexure P3 with the writ petition. One of the incentives envisaged under the Code was exemption from payment of sales tax during a period of 7 to 10 years. On September 5, 1994, the petitioner was granted exemption. A copy of the certificate is at annexure P4 with the writ petition. 4.. On April 11, 2000, the Punjab Social Security Act (No. 11 of 2000) was enacted. By this Act, a social security cess was imposed. This Cess was to be levied on ad valorem basis at the rate of 10 per cent on the sale or purchase of goods. A copy is at annexure P5 with the writ petition. On September 20, 2000, section 3 of the Act was amended with effect from April 11, 2000 by Punjab Act No. 18 of 2000. By the amendment, the rate of cess was fixed at 10 per cent of the sale/purchase tax, which was leviable under the provisions of the Punjab General Sales Tax Act, 1948. 5.. Aggrieved by the levy of the cess, the petitioners in these cases have approached this Court through this set of writ petitions. It is alleged that no tax can be levied or collected by the State "except by the authority of law". Entries 45 to 63 in List II of the Seventh Schedule d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the impugned Act. The two are distinct levies with different aims and objects. These have been imposed under two different Acts passed by the State Legislature. The cess has been imposed for the purpose of social welfare. It is in public interest. The State Legislature was competent to enact the impugned Act. The petitioner "has been promised exemption from sales tax. The imposition of social security cess which is not a sales tax, does not deprive the petitioner of the privilege of exemption from the sales tax. Consequently, the State has not backed out from the promise of exemption....." It has been imposed to render assistance in the form of pension to senior citizens, widows, destitute women, dependent children and the disabled persons, etc. The cess "has not been levied on sale or purchase of goods but the formula for calculation of the cess is that it is to be collected on the amount of tax involved in the sale and purchase of the goods. Tax on sale and purchase of the goods is to be calculated under the Punjab General Sales Tax Act whereas cess is to be calculated on the tax paid". The grounds raised by the petitioners have been controverted. On these premises, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding anything contained in any other law for the time being in force and subject to the rules made under this Act, there shall be levied for the purposes of this Act, a cess on ad valorem basis at the rate of ten per cent of the tax payable on all the sales and purchases of goods made under the Punjab General Sales Tax Act, 1948 effected after coming into force of this Act, except the goods declared to be of special importance in inter-State trade or commerce under section 14 of the Central Sales Tax Act, 1956." (Emphasis supplied). Here italicised. 4.. (1) There shall be constituted a fund to be called the Punjab Social Security Fund, in the manner as may be prescribed. (2) The fund shall vest with the Government. 5.. (1) The fund shall be applied for the purposes as may be prescribed. (2) Without prejudice to the generality of the provisions of subsection (1), the fund shall be applied for the following purposes, namely: (a) old age pension scheme; (b) financial assistance to the widows and destitute women; (c) financial assistance to the dependent children; (d) financial assistance to the disabled persons; and (e) any other social security measures inciden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to make Rules for carrying out the purposes of the Act. However, no Rules were brought to our notice. 13.. A perusal of the above provisions shows that the cess has been imposed "for the purposes" of the Act. It has to be charged "on ad valorem basis at the rate of 10 per cent of the tax payable on all the sales and purchases of goods made under the Punjab General Sales Tax Act, 1948....." The proceeds of the cess shall go into the Punjab Social Security Fund. It shall be used for the payment of old age pension and financial assistance to the needy or "as may be prescribed". The cess has to be levied and collected by the authorities empowered under the Punjab General Sales Tax Act, 1948. The manner of collection can be prescribed under the rules. The proceeds of the cess have to be deposited in "a specified account in a Scheduled Bank." This "account" is operated by the Government. The deposit may be made in the fund "within such period as may be prescribed". During the interregnum the Government has the money at its disposal. The Government has been empowered to invest the surplus funds "in such manner as it may deem fit". It can constitute advisory committees to advise it reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclude the power to levy tax for that purpose. Entries 1 to 44 form one group. These embody the subjects on which the State Legislature can legislate. However, it cannot levy a tax while enacting a law relatable to any of the fields covered by these entries. Similarly, entries 45 to 63 form another group and provide for the levy of taxes by the State Legislature. Entry 66 empowers the State to levy fees. 20.. Entries 9 and 42 are not a part of the taxing provisions. Thus, the State Legislature can make provision for "Relief of the disabled......" and "State pensions". However, while enacting such a law, it cannot levy a tax to collect funds for providing relief to the disabled or payment of State pensions. Thus, the impugned levy cannot be sustained with reference to these entries. 21.. Is there any other source of power? Are the provisions of the Act referable to any entry in List II authorising the impugned levy? Reference has not been made to any taxing entry in List III. 22.. A perusal of section 3 of the Act shows that it is in essence a levy on the sale and purchase of goods. The cess, which is in the nature of a tax, is charged at the rate of 10 per cent of the sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s collected by the State as taxes must go into the "Consolidated Fund of the State". These must be utilised to meet the grants made by the Assembly. No money can be withdrawn from the Consolidated Fund "except under appropriation made by law passed" in accordance with the provisions of article 204. The Appropriation Act gives legal sanction to the grants voted by the Legislature. The money has to be utilized in accordance with the directions of the Legislature. The revenue collected by the State has to be subjected to the democratic process of demand and debate in the Assembly. The amount can then be utilised by the Government in accordance with the allocation made by the Legislature. Not otherwise. The reason is simple. The tax payer's money is in trust with the State. It should be spent in accordance with the will of the elected representatives of the people. Thus, the "revenues" cannot go into any fund like the "Social Security Fund ". The money cannot be drawn or utilised by the executive at its will and pleasure. 22.. It is true that the tax is collected by the local authorities as well. Like octroi. It is levied in accordance with the relevant law on the "entry of goods int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.. In view of the above, it is held that the levy of the cess and creation of the fund are ultra vires the Constitution. The first question is, accordingly, answered in favour of the petitioners. Reg. (ii): 28.. Mr. Sibal submitted that the State has granted exemption from payment of sales tax as also the "surcharge" to attract "industry". Then it has devised a method to collect funds for populist measures like "Sangat Darshans". The counsel contended that having granted exemption from payment of sales tax, the State is estopped from imposing the impugned cess. Is it so? 29.. The sales tax is a levy on the sale and purchase of goods. It forms a part of the revenues of the State. In accordance with the policy of granting incentives, the State has allowed exemption to the petitioners. However, this cannot, by itself, preclude the State from levying other taxes. It appears difficult to invoke the principal of "equitable estoppel" as enunciated in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 44 STC 42 (SC); AIR 1979 SC 621 and to say that the State was estopped from levying the impugned cess. Still further, it is the State's own case (i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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