1978 (10) TMI 132 - SC - VAT and Sales Tax

Supreme Court Upholds Decision on Sales Tax for Silken Fabrics

The Supreme Court dismissed the appeal, upholding the decision of the High Court. It ruled that the Union Territory of Chandigarh could not levy sales tax ... Validity of executive amendment of tax exemption schedule - Notification of intention versus operative amendment - Law in force under a reorganisation statute - Non-extension of pre-reorganisation provisional notifications to successor territory - Absence of deeming fiction to transfer provisional executive acts on reorganisationNotification of intention versus operative amendment - Validity of executive amendment of tax exemption schedule - Non-extension of pre-reorganisation provisional notifications to successor territory - Whether the notification dated August 24, 1966, issued by the composite State of Punjab, notifying its intention to amend Schedule B, could be availed of by the Government of the Union Territory of Chandigarh to effect an amendment of item 30 of Schedule B. - HELD THAT: - Section 6 of the Punjab General Sales Tax Act required an initial notification of intention followed, after the specified period, by a like notification to effect the amendment; the first notification alone did not have the force of law. The notification of August 24, 1966, having been issued before the appointed day but without the consequent amending notification, did not constitute a law in force at the time the Union Territory of Chandigarh came into existence. No provision in the Punjab Reorganisation Act, 1966, or elsewhere was shown to operate as a deeming fiction to convert the erstwhile State's provisional notification into a valid notification of the new Union Territory. The court therefore held that the Union Territory Government could not rely upon the earlier provisional notification to amend Schedule B and levy tax on the goods in question.The amendment based on the August 24, 1966 notification was invalid and could not be availed of by the Union Territory; the High Court's declaration of invalidity was upheld.Final Conclusion: The appeal is dismissed with costs; the High Court's declaration that the amendment of item 30 in Schedule B was invalid is sustained because the preliminary notification did not become a law in force on reorganisation and there is no deeming provision to transfer its effect to the Union Territory. Issues:1. Validity of amending item 30 in Schedule B to the Punjab General Sales Tax Act, 1948.2. Interpretation of section 6 of the Act regarding the power to amend the schedule.3. Application of section 88 of the Punjab Reorganisation Act, 1966 in the context of the case.4. Consideration of whether the notification issued by the erstwhile State Government of Punjab could be deemed to be issued by the new Government of the Union Territory.Analysis:The Supreme Court heard an appeal regarding the validity of amending item 30 in Schedule B to the Punjab General Sales Tax Act, 1948. The case involved the Union Territory of Chandigarh and the power to amend the tax schedule. The Court noted that under section 6 of the Act, the State Government could amend the schedule by notification after a specific period. The issue arose when the State Government of Punjab issued a notification to exclude pure silken fabrics from the list of tax-free goods, but before the amendment could take effect, the Union Territory of Chandigarh was established. The Union Territory then issued a notification to amend item 30. The respondent challenged this, arguing the new Government could not rely on the earlier notification. The Court examined section 88 of the Punjab Reorganisation Act, 1966, which clarified that no law in force immediately before the appointed day would apply to the new territories unless specified. The Court held that the erstwhile State Government's notification did not constitute a law in force when the reorganisation occurred, thus the Union Territory could not levy sales tax on silken fabrics based on the prior notification.The appellant attempted to argue that the notification issued by the erstwhile State Government could be deemed valid for the new Government of the Union Territory. However, the Court found no legal basis or provision to support this argument. The appellant failed to demonstrate any 'deeming' provision in the relevant laws that would allow the transfer of authority from the old to the new government. The Court rejected this argument, emphasizing the lack of legal fiction to support such a claim. Additionally, the appellant's reliance on a previous court decision regarding retrospective amendments by new legislatures after state reorganisation was deemed irrelevant and unhelpful in the present case.In conclusion, the Supreme Court dismissed the appeal, upholding the decision of the High Court. The Court found that the Union Territory of Chandigarh could not levy sales tax on pure silken fabrics based on the notification issued by the erstwhile State Government of Punjab. The judgment clarified the limitations on the applicability of prior notifications and emphasized the absence of legal provisions supporting the appellant's arguments. The dismissal of the appeal was accompanied by a cost order against the appellant.