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TMI Blog2017 (10) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1) of the Delhi Act, whose marginal note reads "incidence of tax". Section 3 (1) states as under:- "3. Incidence of Tax (1) Every dealer whose turnover during the year immediately preceding the commencement of this Act exceeds the taxable quantum and every dealer who at the commencement of this Act, is registered or is liable to pay tax under the Central Sales Tax Act, 1956 (74 of 1956) shall be liable to pay tax under this Act on all sales effected by him on or after such commencement." The obverse side of incidence of tax is provided by Section 7 of the said Act, which reads as under:- "7. Tax free goods (1) No tax shall be payable under this Act on the sale of goods specified in the Third Schedule subject to the conditions and exceptions, if any, set out therein. (2) The Lieutenant Governor may by notification in the Official Gazette, add to, or omit from, or otherwise amend, the Third Schedule either retrospectively or prospectively, and thereupon the Third Schedule shall be deemed to be amended accordingly: PROVIDED that no such amendment shall be made retrospectively if it would have the effect of prejudicially affecting the interests of any dealer." 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or class of goods if the Lieutenant Governor is of the opinion that it is expedient in the interest of the general public so to do, he may, by notification in the Official Gazette, direct that the tax in respect of taxable turnover of such goods or class of goods shall, subject to such conditions as may be specified, be levied at such modified rate not exceeding the rate applicable under this section, as may be specified in the notification. (2) For the purpose of this Act, "taxable turnover" means that part of a dealer's turnover during the prescribed period in any year which remains after deducting there from: (a) his turnover during that period on- (i) sale of goods, the point of sale at which such goods shall be taxable is specified by the Lieutenant Governor under section 5 and in respect of which due tax is shown to the satisfaction of the Commissioner to have been paid; (ii) sale of goods declared tax-free under section 7; (iii) sale of goods not liable to tax under section 8; (iv) sale of goods which are proved to the satisfaction of the Commissioner to have been purchased within a period of twelve months prior to the date of registration of the dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly filled and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars in the prescribed form obtainable from the prescribed authority in the manner and subject to such condition as may be prescribed is furnished in the prescribed manner and within the prescribed time, by the dealer who sells the goods:] PROVIDED ALSO that where any goods are purchased by a registered dealer for any of the purposes mentioned in sub-clause (v), but are not so utilised by him, the price of the goods so purchased shall be allowed to be deducted from the turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer; and (b) the tax collected by the dealer under this Act, as such and shown separately in cash memoranda or bills, as the case may be." The question that has been raised in the present appeals relates to "tobacco" specified in the Third Schedule, read with Section 7, as tax free goods as follows:- "22. Tobacco as defined under the Central Excises and Salt Act, 1944 (1 of 1944)." 4) We have been taken to the Central Excises and Salt Act, 1944 as it obtained in the year 1975. The relevant entry in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent legislation would throw light on what is contained in the earlier legislation, for subsequently under the Central Excise Tariff, Pan Masala which contains tobacco, commonly known as Gutka, is specified under Entry 2404.49 under the heading "Chewing Tobacco and preparations containing chewing Tobacco; Pan Masala containing Tobacco". In addition, it was pointed out that under the Chapter notes, para 3 in particular, the definition of "tobacco" remains exactly what it was in 1975, which now subsumes Pan Masala which includes tobacco. 5) The impugned judgment of the Delhi High Court dated 05.11.2004 has held, on a reading of the aforesaid provisions, that a notification dated 31.03.2000, which introduced as Item 46 in the First Schedule "Pan Masala and Gutka" w.e.f. 01.04.2000, would have to be read as eating into the exemption for "tobacco" generally, and that therefore, on and from this date, Pan Masala which includes tobacco would become exigible to sales tax. This was done on two bases; first, that, as was held by the Kerala High Court in Reliance Trading Company vs. State of Kerala, (2000) 119 STC 321 (Ker.), if there are two entries, one general and another specific, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 SCC 656 at para 29] Also, in a recent Constitution Bench judgment delivered by this Court in Commissioner of Income Tax (Central)-I, New Delhi vs. Vatika Township Private Limited, (2015) 1 SCC 1, after referring to an earlier judgment of this Court, this Court stated that the components which enter into the concept of taxability are well known and distinct. The first is the imposition of tax which prescribes the taxable event attracting the levy. The second is an indication of the "taxable person" i.e. the person on whom the levy is imposed and who is obliged to pay the tax. The third is the rate at which tax is imposed. The fourth is the measure or value to which the levy will be applied for computing tax liability. 8) Keeping these parameters in mind, a three-Judge Bench of this Court held, in Reliance Trading Company, Kerala vs. State of Kerala, (2011) 15 SCC 762 at 766-767, on pari materia provisions of the Kerala General Sales Tax Act, that there can be no confusion or mixing up between the incidence of tax and exemption of tax on the one hand and the rate of tax on the other. On the facts of that case, "Tarpaulin" was separately classified under the First Schedule to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless goods are exigible to tax. Thus, unless the goods were specified in Schedule I or II of the KGST Act the goods would not be liable to tax at all and, therefore, there would be no question of granting exemption from tax. Thus, it would be unnecessary to specify them in the Third Schedule, unless by reason of Section 5 read with Schedule I or II, the goods were exigible to tax. The fact that "tarpaulin" was included in the First Schedule does not carry the matter any further in favour of the Revenue as it is clear that the exemption operating in favour of cotton-based tarpaulin as covered by "cotton fabrics" in the Third Schedule continues as no corresponding change has been made therein by the legislature even after the amendment of the First Schedule by the introduction of "tarpaulin". The legal result, consequently, is that cotton-based tarpaulin would continue to be leviable to tax under the ADEA, and by reason of Entry 7/Entry 11 of the Third Schedule the said goods would be exempted from exigibility to sales tax under the KGST Act. This legal result would follow irrespective of whatever might have been the presumed intention of the legislature in amending Schedule I. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, which accords the view of this Court in the Kothari Products (supra) and Reliance Trading Company (supra) judgments. One other interesting feature of this case is whether, after Union of India vs. Raghubir Singh, 1989 (3) SCR 316 at 335-337, it can be stated that Judges of this Court do not sit in 2's and 3's for mere convenience, but that a Bench which is numerically superior will prevail over a Bench of lesser strength. If the doctrine of precedent, as applied by this Court, is to be a matter of numbers, then, interestingly enough, as has been held by Beaumont C.J. in Ningappa Ramappa Kurbar and Another vs. Emperor, AIR 1941 Bombay 408 at 409, the position in law could be as under: "... The Court in that case consisted of five Judges, one of whom, Shah J., dissented from that proposition. The authority of the case may be open to question, since there had been a previous decision of a Full Bench of this Court of four Judges in Queen-Empress v. Mugappa, (1894) 18 Bom 377 (FB), which had reached a different conclusion. Apparently it was considered that five Judges, by a majority of four to one, could overrule a unanimous decision of four Judges, the net result being that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew on an issue of fact and law, that view was found to be incorrect by 5 learned Judges, whose decision actually holds the field today. Is the weight of numbers irrelevant? Is it that only the numbers in a subsequent Bench are what really matters? What would have been the position if only 4 learned Judes in Pradeep Kumar Biswas had decided to overrule Sabhajit Tewary while the remaining 3 learned Judges found no error in that decision? Would a decision rendered unanimously by a Bench of 5 learned Judges stand overruled by the decision of 4 learned Judges in a subsequent Bench of 7 learned Judges? Pradeep Kumar Biswas presents a rather anomalous situation which needs to be addressed by appropriate rules of procedure. If this anomaly is perpetuated then the unanimous decision of 9 learned Judges in the Third Judges case (Special Reference No. 1 of 1998, In Re, (1998) 7 SCC 739) can be overruled (as sought by the learned Attorney General) by 6 learned Judges in a Bench of 11 learned Judges, with 5 of them taking a different view, bringing the total tally of Judges having one view to 14 and having another view to 6, with the view of the 6 learned Judges being taken as the law!" 12) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, two other learned Judges namely, Lord Simon and Lord Salmon disagreed on the law, and held that his claim was barred. Lord Pearson was stated to be the odd man out. He held that time did not run against Dodd, since Dodd did not appreciate that the appellants were at fault and that his injuries were attributable to their fault. On that ground, he agreed with Lord Reid and Lord Morris, as a result of which Dodd succeeded. However, he went on to say that he agreed with the opinion of the minority as to the proper construction of the statute in law. Faced with this, Lord Denning M.R. set out four interesting propositions on how a ratio is to be discovered and or read in a judgment. He stated: "How then do we stand on the law? We have listened to a most helpful discussion by counsel for the proposed plaintiffs on the doctrine of precedent. One thing is clear. We can only accept a line of reasoning which supports the actual decision of the House of Lords. By no possibility can we accept any reasoning which would show the decision itself to be wrong. The second proposition is that, if we can discover the reasoning on which the majority based their decision, then we should accept that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ratio decidendi common to the majority of the House of Lords in deciding Dodd's case. Their Lordships were divided three to two in the decision to affirm the judgment of the Court of Appeal; but in the reasons for their decision they appeared to be divided two to two, Lord Pearson taking a third view which perhaps came closer to the view of the minority. In those circumstances I do not think that we can treat the reasoning of the majority of the majority - Lord Reid and Lord Morris of Borth-y-Gest - as the ratio decidendi of the house. It is the ratio given by only two out of five. Still less can we treat the 'ratio dissentiendi' appearing from the speeches of the minority - Lord Simon of Glaisdale and Lord Salmon - as binding if added to Lord Pearson's. That seems to have been the view of Thesiger J; but having had the advantage denied to him of counsel's argument, I respectfully disagree with him. We are therefore bound by the decision of the House of Lords affirming the decision of this court, but not by the reasoning in the speeches of their Lordships. That, in my judgment, sends us back to the decision of this court [1971] 3 All ER 204, [1972] 1 QB 244 and the ratio of its d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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