TaxTMI 
TaxTMI 
1971 (11) TMI 143
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....gment of the court was delivered by VAIDIALINGAM, J.-These seven appeals, on certificate, are by the State of Punjab, challenging the judgments and orders of the Letters Patent Bench of the Punjab High Court dismissing in limine the appeals filed by the State against the decisions of the learned single judge either quashing the orders of assessment of sales tax made by the concerned Sales Tax Officer or directing the said officers to reconsider the orders and pass fresh orders of assessment. The assessments that were challenged before the High Court were made under the Punjab General Sales Tax Act, 1948 (Punjab Act No. 46 of 1948) (hereinafter to be referred as the Act). Civil Appeals Nos. 2320 of 1968 and 1468 of 1969 relate to the assessment year 1960-61, Civil Appeals Nos. 2319 of 1968 and 1467, 1469 and 1470 of 1969 relate to the assessment year 1961-62 and Civil Appeal No. 1466 of 1969 relates to the assessment year 1962-63. The controversy related to the assessment to sales tax under the Act, in respect of cotton, which admittedly is an item of "declared goods" within the meaning of section 2, clause (c), read with section 14 of the Central Sales Tax Act, 1956 (A....
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....e of ginned cotton sold to the registered dealers and for inter-State trade and commerce. The firm's claim before the assessing authority appears to have been that if three maunds of kapas is ginned, it gives roughly one maund of ginned-cotton, which if disposed of in toto should be equivalent to the purchase price of three maunds of kapas originally purchased. The assessing authority appears to have proceeded on the basis that out of the total quantity of unginned cotton purchased by the firm, only 1/3rd quantity of the unginned cotton can be considered to have been sold as ginned cotton. Deductions, according to the assessing authority, under section 5(2)(a)(vi) of the Act from the purchase turnover of unginned cotton, should be fixed at 1/3rd of the total price paid for the unginned cotton. The assessing authority has also proceeded on the basis that the amount realised by the firm by sale of cotton seeds, as a result of ginning, cannot be taken into account for calculating the turnover under section 5(2)(a)(vi) of the Act, as the said material is something different from cotton. The firm had also challenged the order of assessment that the levy of sales tax on cotton, which is ....
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....ion, and directed the Sales Tax Officer to re-decide the matter and modify and make an assessment order in accordance with the law laid down in Patel Cotton Company Private Ltd.'s case [1964] 15 S.T.C. 865. The State filed Letters Patent Appeal No. 182 of 1965 under clause (x) of the Letters Patent Act, which was dismissed, in limine, by the Division Bench on July 23, 1965. In Civil Appeal No. 2320 of 1968, the order of assessment is dated February 24, 1964. The assessee filed Civil Writ No. 454 of 1964 and the High Court passed a similar order in his favour on March 5, 1965. The Letters Patent Appeal No. 196 of 1965 filed by the State was rejected in limine on July 23, 1965. In Civil Appeal No. 1466 of 1969, the assessment order is dated March 10, 1964. The assessee filed Civil Writ No. 810 of 1964. The learned single Judge by his order dated February 3, 1965, allowed the writ petition following the decision in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865. , and quashed the order of assessment. The Letters Patent Appeal No. 127 of 1965 filed by the State was dismissed in limine on May 17, 1965. In Civil Appeal No. 1467 of 1969, the assessment order is dated Marc....
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....fitness have been granted by the Letters Patent Bench. We may also add that though the question, regarding the legality of the assessment under the Act as being opposed to the Central Act, on the ground that no stage for collection of tax has been fixed, was raised by all the assessees, that point was not adjudicated upon by the High Court in any of these matters. Mr. V. C. Mahajan, learned counsel for the State, pointed out that the decision in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865., which was relied on by the High Court, has been overruled by this court in State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849. In consequence, he urged that all the State appeals will have to be allowed and the assessment orders should be allowed to stand. On the other hand, Mr. S. V. Gupte, learned counsel appearing for the respondent in Civil Appeal No. 2319 of 1968, whose contentions have been adopted by the other counsel appearing for the respondents in other appeals, urged that the decision of this court, relied on by Mr. Mahajan, had no occasion to consider the position regarding collection of sales tax in respec....
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....special importance in inter-State trade or commerce". Section 14 declares the various goods referred to therein as of special importance in inter-State trade or commerce. Therefore, it follows that those goods are "declared goods" under section 2(c) of the Central Act. Item (ii) of section 14 of the Central Act dealing with cotton is identical with item (1) of Schedule C of the Act. It is also necessary to note that the definition of "sale" in section 2(h) of the Act excluded goods specified in Schedule C and that the expression "purchase" under section 2(ff) took in the goods specified in Schedule C of the Act. Section 5 of the Act dealt with the levy of tax on the turnover of a dealer at the rates mentioned therein and other consequential matters. Sub-section (2) dealt with the taxable turnover as well as the various deductions which a dealer is eligible to claim in the computation of the said taxable turnover. The claim for deduction was made by the assessees before us under section 5(2)(a)(vi) of the Act which is as follows: "5. (2) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting th....
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....ever, declined to allow any deduction for similar sales on cotton seeds. The assessee contended before the High Court that the sale of cotton seeds was a sale of the goods purchased by them in respect of which purchase tax was payable and since the sales were made to registered dealers or in the course of inter-State trade, the taxable turnover should be determined after deducting the purchase price of the goods sold from the gross turnover. On behalf of the State, it was contended that unginned cotton and ginned cotton are two different things and if unginned cotton is purchased and purchase tax paid on it and later on the cotton is ginned and sold, no part of the goods purchased can be considered to have been sold. It was urged that cotton seed is a different thing from cotton and therefore the sale price of cotton seeds cannot be deducted under section 5(2)(a)(vi). The High Court held that no manufacturing process is involved in ginning cotton and in the process of ginning no new commodity is created. The High Court further held that when a dealer buys unginned cotton, which is mixed with cotton seeds and separates the two, by process of ginning and proceeds to sell both t....
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....said decision, were the years of assessment 1960-61 and 1961-62. The decision in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865., was the subject of appeals in this court in The State of Punjab and Others v. Patel Cotton Company Private Ltd., Bhatinda, and Others C.A. Nos. 1120, 1123 and 1214 of 1966 decided on April 18, 1967. This court, by its judgment dated April 18, 1967, did not think it necessary to consider the correctness or otherwise of the decision of the High Court that the assessees, when they sold ginned cotton and cotton seeds, had sold the same commodity that had been purchased by them. The State appeal was dismissed on the short ground that the levy of purchase tax was opposed to the Central Act, as held by this court in Bhawani Cotton Mills Ltd. [1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577. Though the High Court had directed fresh assessments to be made in accordance with its decision, this court, however, quashed the orders of assessment also. We have already indicated that the certificates were issued in the appeals before us by the High Court in view of the fact that the decision in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865.....
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....nd that stage shall be- (i) in the case of goods liable to sales tax the stage of sale of such goods by the last dealer liable to pay tax under this Act; (ii) in the case of goods liable to purchase tax, the stage of purchase of such goods by the last dealer liable to pay tax under this Act; (b) the taxable turnover of any dealer for any period shall not include his turnover during that period on any sale or purchase of declared goods at any stage other than the stage referred to in sub-clause (i), or as the case may be, sub-clause (ii) of clause (a).'" Section 9 of the Amendment Act incorporated a new section 11AA in the Act, which is as follows: "11AA. Review of certain assessments, etc., of tax on declared goods- (1) Notwithstanding anything contained in this Act, the Assessing Authority shall (whether or not an application is made to him in this behalf), review all assessments and reassessments made before the commencement of the Punjab General Sales Tax (Amendment and Validation) Act, 1967, in respect of declared goods and make such order varying or revising the order previously made as may be necessary for bringing the order previously made into c....
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....m the reference made therein to "such goods". This amendment is also deemed to have come into effect from December 16, 1965. The new sub-section (3) added to section 5 of the Act was to have effect from October 1, 1958. Under the new sub-section (3), in respect of declared goods, the stage of levy either in respect of purchase or sale has also been definitely fixed. Under clause (b) of section 3, certain turnovers in respect of sale or purchase of declared goods, as referred to therein, cannot be included in the taxable turnover. The new section 11AA makes it obligatory on the assessing authority, under the circumstances mentioned therein, to review all assessments and reassessments made before the commencement of the Amendment Act in respect of declared goods. There is also an obligation cast on the officer to make orders varying or revising the previous orders, so as to bring them into conformity with the provisions of the Act, as amended by the Amendment Act. Even the provisions contained under sub-section (4) of section 11AA have been made subject to the provisions of sub-sections (1) to (3) of the said section. It will be seen from the amendments, referred to above, that....
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....is clear that levy of sales tax, under the Act as it stood on April 1, 1960, on declared goods is illegal and void. We have already referred to the fact that certain decisions of the Punjab High Court, which had taken a view similar to the one in Patel Cotton Company Private Ltd. [1964] 15 S.T.C. 865., were also subject of appeals in this court. They were disposed of on February 27, 1969, by the judgment of this court in State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., The claim made by the assessees before the High Court was that in calculating the taxable turnover under section 5(2)(a)(vi) of the Act, as it stood on April 1, 1960, deductions must be made on the purchase price of unginned cotton, which has been sold later as ginned cotton and cotton seeds. The High Court had accepted this contention. The State of Punjab had filed the appeals in this court. This court in the above decision accepted the contention of the State that ginning process is a manufacturing process and that it is by such a manufacturing process that the cotton and the cotton seeds are separated. This court further held that it is not cor....
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....by the two Ordinances, referred to above, came to be enacted. We have also referred to the fact that the scheme of assessment regarding declared goods has been changed and altered by the Amendment Act. When the Amendment Act was again challenged before this court, the Constitution Bench in Rattan Lal and Company and Another [1970] 25 S.T.C. 136 (S.C.); [1969] 2 S.C.R. 544., has approved the decision in Bhawani Cotton Mills Ltd. [1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577., and accepted the position that under the Act, as it stood on April 1, 1960, sales tax in respect of declared goods could not be levied. Further, it was pointed out in Rattan Lal and Company and Another [1970] 25 S.T.C. 136 (S.C.); [1969] 2 S.C.R. 544., that the infirmities that existed in the Act, as it stood on April 1, 1960, had been removed and the Amendment Act was valid. With great respect to the learned judges, who decided the State of Punjab and Others v. Chandu Lal Kishori Lal and Others', it must be held that there is absolutely no reference to the decisions of this court in Bhawani Cotton Mills Ltd.[1967] 20 S.T.C. 290 (S.C.); [1967] 3 S.C.R. 577., and Rattan Lal and Company and Another [1970] 2....
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....gnoring the provisions of the Amendment Act which, we have already said, has evolved a new scheme regarding the levy of sales tax in respect of declared goods. The decision in the State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., can at the most be considered to have decided that cotton seeds are not declared goods and that it is by the manufacturing process that cotton and cotton seeds are separated. As the Act, as amended by the Amendment Act, has to be applied in respect of assessment of sales tax on declared goods, the decision in the State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., is, in our opinion, no bar to the assessee's urging their objections regarding the validity of the orders of assessment. Further, this court had no occasion to consider in the State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., whether when unginned cotton has been purchased and the entire quantity of ginned cotton obtained therefrom has been sold, the price obtained from the latter is "a turnover on the purc....
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....h the provisions of the Act as amended by the Amendment Act, after following the procedure indicated therein. The fact that there is a judgment of a court is also no bar to the assessing authority to do his duty cast upon him under section 11AA. This has been made clear by sub-section (4) to section 11AA, which makes the said sub-section subject to the provisions of sub-sections (1) to (3) of the section. In view of the specific provisions contained in section 11AA, we do not think it necessary to consider and express any opinion regarding the contention of Mr. Gupte. The assessees are entitled to raise all objections available to them in law or on facts in respect of declared goods, when the assessing authority takes action under section 11AA of the Act, as he is bound to do. But, we make it clear that in the fresh assessment proceedings, the assessing authority has to consider the matter, in the light of the provisions of the Amendment Act incorporated in the Act; and the decision of this court in the State of Punjab and Others v. Chandu Lal Kishori Lal and Others [1970] 25 S.T.C. 52 (S.C.); [1969] 3 S.C.R. 849., cannot operate to the prejudice of the assessees. We have alr....