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TMI Blog2020 (3) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions made by the learned counsel for the petitioners therein, even regarding declared goods have been considered, they appear to have been considered in the context of the declared goods having been used in the manufacture of other goods which resulted in new and different goods being sold and not in the context of both purchase and sale of declared goods. Moreover, reading the findings recorded by the Division Bench in their entirety, it is evident that there is no discussion in the context of section 15(b) of the CST Act. While the court in the above decision has recorded the submissions advanced on behalf of the petitioners therein in respect of declared goods also, from the submissions advanced by the learned Advocate General it appears that in the facts of those cases, the petitioners had manufactured and sold, new and different goods and the vital condition for reimbursement under section 15 of the CST Act, viz. the purchased as well as sold goods both should be declared goods , was not satisfied; whereas in the facts of the present case, the petitioners are traders who have purchased declared goods and sold such declared goods in the course of inter-State trade and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r(s) No. 1,2 Ms Maithili Mehta, Assistan Government Pleader(1) for the Respondent(s) No. 1,2 ORAL JUDGMENT (PER : MS. JUSTICE HARSHA DEVANI) 1. By this petition under article 226 of the Constitution of India, the petitioners have challenged Notification No. (GHN14) VAT-2010-S.11(6)(2)-TH dated 29th June, 2010 issued by the Government of Gujarat in exercise of powers conferred by sub-section (6) of section 11 of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the GVAT Act ) insofar as it requires reduction of input tax credit in respect of purchases of hides and skins resold in the course of inter-State trade and commerce and subjected to tax under the Central Sales Tax Act, 1956 (hereinafter referred to as the CST Act ) as violative of article 286(3) of the Constitution of India read with section 15(b) of the CST Act. Alternatively, the petitioners seek a declaration that the impugned notification cannot lead to denial of reimbursement as per section 15(b) of the CST Act in assessment under the GVAT Act. The petitioners further seek a direction to the respondents to grant reimbursement under section 15(b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter-State trade and commerce. Tax was paid on such inter-State sales under the CST Act. Section 11 of the GVAT Act provides for input tax credit of tax paid under the GVAT Act on hides and skins. It is the case of the petitioners that they believed that refund admissible under section 15(b) of the CST Act was being granted in the form of input tax credit under the GVAT Act and, therefore, they claimed full input tax credit of tax paid on purchase of hides and skins which were sold in the course of inter-State trade and commerce. 5. Section 11(6) of the GVAT Act empowers the Government to specify goods or class of dealers that shall not be entitled to whole or partial tax credit. In exercise of such powers, the impugned notification was issued by the Government providing that input tax credit would have to be reduced in respect of the goods sold in the course of inter-State trade and commerce. There was no exclusion of trading in declared goods such as hides and skins for the purpose of reduction of input tax credit. The said entry was substituted by Notification No. (GHN-35) VAT-2010-S.11(6)(3)-TH dated 7th September, 2010 so as to exclude certain goods from the purview o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) of section 15 of the CST Act as enacted by the Central Sales Tax (Second Amendment) Act, 1958 used the term refund instead of reimbursement and further did not provide as to whom such refund is to be granted. Thus, confusion prevailed in this regard and the provision was therefore amended by the Central Sales Tax (Amendment) Act, 1972, to provide for reimbursement to the person making inter-State sales. It was pointed out that a question arose as to what would be the position prior to the period of such amendment and the Supreme Court in Manickam and Co. v. State of Tamil Nadu, (1977) 39 STC 12 (SC), held that such amendment was only clarificatory in nature and that the provision should be interpreted as always providing for refund to the person making the inter-State sales. 7.3 It was further submitted that the provisions of section 15 of the CST Act override the sales tax provisions of the State legislation such as the impugned notification. In support of such submission, reliance was placed upon the decision of this court in the case of State of Gujarat v. Narayan Traders, (1979) 43 STC 516 (Guj.), wherein the assessee had purchased cotton yarn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11 of the GVAT Act. It was contended that therefore, reduction of input tax credit qua declared goods by the impugned notification results in reduction of reimbursement under section 15(b) of the CST Act, which is beyond the competence of the State Government and illegal. It was contended that it is possible to challenge a delegated piece of legislation as being contrary to the parent statute or being contrary to any other statute. This is on the principle that subordinate legislation must yield to plenary legislation. In support of such submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India and Ors., AIR 1986 SC 515. It was urged that the impugned notification being directly in conflict with section 15(b) of the CST Act is bad and illegal. It was submitted that the respondents have erred in relying upon the decision of this court in the case of Kadwani Forge Ltd. v. State of Gujarat rendered on 22.7.2014 in Special Civil Application No.17439 of 2019, for defending curtailment of input tax credit by the impugned notification. 7.6 It was pointed out that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das case and to the learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavement or public streets, and without any citation of authority. Accordingly, we do not propose to uphold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by the terms of the relevant provisions. A decision should be treated as given per in-curiam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the Court on the question or not whether any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a PG NO 939 pavement squatter. Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weight of authority. 7.8 Reliance was also placed upon the decision of the Supreme Court in State of U.P. v. Synthetics and Chemicals Ltd., (1991) 4 SCC 139, wherein, the court held thus:- 41. Does this principle extend and apply to a conclusion of law, Which was neither raised nor preceded by any consideration. In other words can such conclusions be considered as declaration of law? Here again the English Courts and jurists have carved out an exception to the rule of precedents. It has been explained as rule of sub-silentio. A decision passed sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular' point of law involved in 93 the decision is not perceived by the Court or present to its mind. (Salmond on Jurisprudence 12th Edition). In Lancaster Motor Company (London) Ltd. v. Bremith Ltd., [1941] IKB 675 the Court did not feel bound by earlier decision as it was rendered 'without any argument, without reference to the crucial words of the rule and without any citation of the authority'. It was approved by this Court in Municipal Corporation of Delhi v. Gurnam Kaur. The Bench held that, 'prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation was also challenged with respect to declared goods and that the findings of the court are based on submissions which include submissions on section 15(b) of the CST Act. It was submitted that the aspect of the notification was dealt with in the said decision, on two counts (i) general reduction of input tax credit; and (ii) section 15(b) of the CST Act. 8.1 It was submitted that section 15(b) of the CST Act does not restrict the powers of the State Government to impose conditions for reimbursement. Reimbursement is subject to conditions imposed by the State Government, and hence, there is no legal infirmity in the impugned notification. Referring to clause (b) of section 15 of the CST Act, it was submitted that the same empowers the State Government to make reimbursement of the State tax in such manner and subject to such conditions as may be provided in any law in force in that State. It was submitted that accordingly, the impugned notification which places restrictions and conditions for the purpose of reimbursement of the State tax, is in consonance with clause (b) of section 15 of the CST Act. 8.2 Attention was invited to section 11 of the GVAT Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Governments have exercised such power under Section 15 of the MMRD Act and State of Tamil Nadu has enacted in 1959 the Mineral Concession Rules. There is no dispute that the MMRD Act and the rules framed thereunder either by the Central Government or by the State Government are for mineral development sub-serving the cause of public interest. It cannot also be disputed that mineral development is not a vague expression and the MMRD Act and the rules framed under it, clearly furnish the scope and purport of the word mineral development . It has been very reasonably contended that scientific exploitation of minerals without waste is undoubtedly a part of mineral development as envisaged by the MMRD Act and the rules framed thereunder. The expression public interest finds place in the Constitution and in many enactments which have since been noted and considered by this Court in various decisions. The said expression is, therefore, a word of definite concept. There is also force in the contention of the appellants that the guidelines need not be expressly found in the impugned provisions but such guidelines can be gathered from the setting of the Act and the rules framed thereun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich such power is to be exercised. In various decisions refer-red to hereinbefore, this Court has upheld such exercise of discretion if the same does not appear to be wholly uncontrolled, uncanalised and without any objective basis 56. There is no manner of doubt that for bringing harmonious construction, reading down a provision in the statute, is an accepted principle and such exercise has been made by this Court in a number of decisions, reference to which has already been made. But we do not think that in the facts and circumstances of the case, and the purpose sought to be achieved by Rule 39, such reading down is necessary so as to limit the application of Rule 39 only for varying some terms and conditions of a lease. If the State Government has an authority to follow a particular policy in the matter of quarrying of granite and it can change the provisions in the Mineral Concession Rules from time to time either by incorporating a particular rule or amending the same according to its perception of the exigencies, it will not be correct to hold that on each and every occasion when such perception requires a change in the matter of policy of quarrying a minor miner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up there under, the price at which tendu leaves are to be purchased by it or its authorized officer or agent from the growers of tendu leaves other than the State Government in the Revenue Commissioner's Division. The said Act received the assent of the President on November 3, 1964, which assent was published in the Madhya Pradesh Gazette Extraordinary on November 28, 1964, and was brought into force in the whole of Madhya Pradesh with effect from November 28, 1964, by Forest Department Notification No. 14334-X-64 dated November 28, 1964, published in the Madhya Pradesh Gazette Extraordinary dated November 28, 1964, at page 3368. The said Act, created a monopoly in the State Government with respect to the trade in tendu leaves in the State as tendu leaves are a major natural produce of the State. According to the High Court, the said Act, therefore, put the trade in tendu leaves in a separate class from the trade in other raw materials and consequently it provided a reasonable basis for treating the trade in tendu leaves differently from the trade in other raw materials. In our opinion, it was strictly not necessary for the High Court to go to the said Act for the purpose of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. Clause (3) of Article 286 was substituted by the Constitution (Forty-sixth Amendment) Act, 1982. Clause (3) as so substituted does not affect the position so far as goods declared by Parliament by law to be of special importance in inter-State trade or commerce are concerned. 18. In pursuance of the power conferred by Article 286(3) Parliament has declared by section 14 of the Central Sales Tax Act, 1956 (Act No. LXXIV of 1956), certain goods to be of special importance in inter-State trade or commerce. Amongst the goods so declared is tobacco, as defined in Item No.4 of the First Schedule to the Central Excises and Salt Act, 1944 . The relevant provisions of the said Item No.4 are as follows : 4. TOBACCO - 'Tobacco' means any form of tobacco, whether cured or uncured and whether manufactured or not, and includes the leaf, stalks and stems of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth. I. Unmanufactured tobacco - x x x x x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease in the rate of tax on the sales and purchases of tendu leaves would necessarily result in an increase in the cost of manufacture of bidis and consequently in their sale price. An increase in the rate of tax on a particular commodity cannot per se be said to impede free trade and commerce in that commodity. In State of Kerala v. A.B. Abdul Khadir and others, [1970] 1 S.C.R. 700, after referring to and explaining the earlier decisions on this subject, this Court held as follows (at page 710) : As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly and immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by Art. 301. A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and in its own setting of time and circumstance. 8.6 Reliance was also placed upon the decision of the Supreme Court in the case of State of U.P. v. Kamla Palace, (2000) 1 SCC 557, wherein the court held thus:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14. Ms. Mehta submitted that the said circumstances do not exist in this case. 8.8 It was emphatically argued that the decision of this court in Kadwani Forge Ltd. (supra) covers the controversy involved in this case as submission was made qua section 15(b) of the CST Act. The findings recorded in the decision deal with same notification applying to declared goods and the court has given a finding upholding the restriction. It was submitted that if this court were to hold the decision of this court in Kadwani Forge Ltd. (supra) does not apply in the facts of the present case, even then, section 15(b) of CST Act, though provides for reimbursement, it also permits imposition of restrictions and conditions under the State Act. Therefore, section 15(b) of the CST Act cannot be so interpreted as to brush aside what is provided in the State law. 8.9 It was submitted that section 11 of the GVAT Act provides for taking input tax cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,- (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29-A) of Article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. 11. Clause (3) of Article 286 of the Constitution of India provides that any State law, insofar as it imposes or authorises the imposition of a tax on sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce shall be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of tax as Parliament may by law specify. Accordingly, Parliament enacted section 15 of the Central Sales Tax Act, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursed to the person who sells such goods in the course of inter-State trade or commerce. The manner and conditions subject to which such reimbursement is to be made would be provided by a law in force in the State. 13. When the Gujarat Sales Tax Act, 1969 was in operation till 31.3.2006, rule 45 of the Gujarat Sales Tax Rules, 1970, made provision for refund of tax for purchase of specified goods sold in the course of inter-State trade or commerce. Rule 45 of the Gujarat Sales Tax Rules, 1970, reads thus: 45. In assessing the tax payable if any, in respect of any period by any dealer (hereinafter referred to as the assessee ) the Commissioner shall subject to the general conditions of rule 47 and further conditions specmed below, grant him a refund of the whole of the tax in respect of the purchase of goods, sold in the course of inter-State trade or commerce. Conditions : (1) The goods are the declared goods as defined in clause (9) of section 2 of the Act, and (2) The said goods have been sold by the assessee in the course of inter-State trade or commerce. Thus, rule 45 of the Gujarat Sales Tax Rules provided for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame to be reduced to one per cent. 16. Thus, while section 15(b) of the CST Act provides for reimbursement of the tax levied under the State law in case such goods are sold during the course of inter-State trade or commerce, in the manner and subject to the conditions provided in the State law; since under the GVAT Act, no rules have been prescribed for the manner and conditions subject to which such reimbursement shall be made, the dealers are given input tax credit in lieu of reimbursement. The question that arises for consideration is whether the State Government can reduce the input tax credit which amounts to reduction of the reimbursement to be made to the dealers. 17. On behalf of the respondents, a preliminary contention has been taken that it is not permissible for this court to delve into the issue as such issue is no longer res integra inasmuch as the same stands concluded by the decision of a Division Bench of this court in the case of Kadwani Forge Ltd. v. State of Gujarat (supra), wherein the very same notification which is subject matter of challenge in this petition was also subject matter of challenge in that case, even in respect of declared good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases of declared goods taking place within the State. It is submitted that pursuant to the powers conferred by the Constitution of India, Parliament has in section 2(c) of the Central Act defined declared goods as those goods which are declared under Section 14 of the Central Act as goods of special importance in inter-State trade and commerce. It is submitted that restrictions of the State in imposing tax on sales or purchases of declared goods are stated in section 15 of the Central Act. It is submitted that on considering section 15 of the Central Act it imposes restrictions and conditions on the power of the State to impose tax on sales or purchases of declared goods taking place within the State. [4.18] It is further submitted that an analysis of section 15(b) of the Central Act reveals the following: (i) On sale or purchase of declared goods tax must have been levied under the State law. (ii) The goods so purchased must have been resold in the course of inter-State trade and commerce. (iii) On inter-State sale tax must have been paid under the Central Act. (iv) In such eventuality, the tax levied under the State law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only to the dealers who had paid the tax. The High Court held that the dealer had purchased by paying tax to the vendor and therefore it was held that it was not entitled to refund of tax paid on local purchases. The Hon ble Supreme Court did not accept the view so held by Madras High Court. According to the Hon ble Supreme Court refund can be given not only to the dealer who had actually deposited the tax to the State but it could not also be to a dealer making inter-State sale because the price charged from such dealer by the seller would normally take into account the sale tax paid by it. While taking this decision, the Hon ble Supreme Court also relied upon the subsequent amendment whereby the term refunded was substituted by reimbursement as is the provision which is currently in force and it has observed as under on page 18: The amended provisions makes it plain beyond any pale of controversy that the tax levied under the State Act in respect of declared goods has to be reimbursed to the person making sale of those goods in the course of inter-State trade and commerce in such manner and subject to such conditions as may be provided in the law in force in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made to the decision of the Supreme Court on which reliance has been placed by the learned advocate for the petitioner on the principle of sub silentio. 23. In Municipal Corporation of Delhi v. Gurnam Kaur, (supra) the Supreme Court placed reliance upon the concept of sub silentio as explained by Professor P.J. Fitzgerald, editor of the Salmond on Jurisprudence, 12th Edn., wherein it has been stated thus: A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio. 24. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidendi. The court referred to its earlier decision in B. Shama Rao v. Union Territory of Pondicherry, (1967) 20 STC 215 (SC), wherein it was observed, it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles, laid down therein . The court held that any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for the sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law. 28. In Arnit Das (1) v. State of Bihar (supra), the Supreme Court held that a decision not expressed, not accompanied by reasons and not proceeding on a conscious consideration of an issue cannot be deemed to be a law declared to have a binding effect as is contemplated by article 141. That which has escaped in the judgment is not the ratio decidendi. This is the rule of sub silentio, in the technical sense when a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules was in consonance with section 15(b) of the CST Act. It is, therefore clear, that even the rule making body, at the relevant time when rule 45 came to be enacted, was conscious of the fact in case of sale of declared goods in the course of inter-State trade or commerce, the whole of the State tax has to be refunded. Under the GVAT Act, since there is no specific provision for refund of State tax levied on declared goods sold in the course of inter-State trade or commerce, input tax credit is granted instead. 32. While sub-section (6) of section 11 of the GVAT Act permits the State Government to specify any goods or class of goods that shall not be entitled to whole or partial tax credit, the said provision cannot be read to mean that it empowers the State Government to override the provisions of section 15(b) of the CST Act and curtail the extent of reimbursement that has to be granted thereunder. When section 15(b) of the CST Act permits the State law to provide for the manner in which such reimbursement is to be granted, which may be subject to restrictions or conditions, it means that it is permissible for the State to decide the mode and manner in which such reim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State and sold in the course of inter-State trade and commerce. 34. The decisions on which the learned Assistant Government Pleader appearing on behalf of the respondents has placed reliance may now be dealt with. In Premium Granites v. State of T.N. (supra), the Supreme Court held that if a suitable provision empowering exemption or relaxation of other provisions in the Mineral Concession Rules is made by confining exercise in an objective manner consistent with the Mines and Minerals (Regulation and Development) Act, 1957 and in furtherance of the cause of mineral development and in public interest, by giving proper guidelines, such provision containing relaxation or exemption cannot be held to be unjustified or untenable on the score of violating the other provisions of the Mineral Concession Rules. The court held that public interest is a paramount consideration in the MMRD Act itself and the rules framed thereunder cannot but sub-serve public interest in furthering the cause of mineral development. Thus, the said decision was rendered in a totally different set of facts and would have no applicability to the facts of the present case. 35. In Vrajlal Man ..... X X X X Extracts X X X X X X X X Extracts X X X X
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