TaxTMI 
TaxTMI 
1979 (5) TMI 135
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....r by the Government of Punjab and the liability of the appellants to pay purchase tax under the Act in respect of the turnover relating to the purchases of paddy made by them during the relevant period. The appellants are dealers in paddy and engaged in the business of millers in the State of Punjab. They buy paddy from growers or katcha adatias, convert it into rice and sell rice. Most of the rice manufactured by them is purchased by the State Government under food procurement orders. A brief history of the relevant provisions of the Act is as follows: Under the Act, as it was originally enacted, there was no provision levying tax on the purchase turnover of the goods dealt with by a dealer as defined in the Act. The Act was amended by Punjab Act No. 7 of 1958, which received the assent of the Governor on April 18, 1958, and the amending Act came into force at once. The amending Act brought about the following changes in the Act: In the long title of the Act, after the word "sale", the words "or purchase" were inserted. Clause (d) of section 2 of the Act, which defined the expression "dealer", was amended so as to bring within the scope of that expression a person who ....
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....y a new section, which read as follows: "6. Tax-free goods.-(1) No tax shall be payable on the sale of goods specified in the first column of Schedule B subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax on the sale of goods which are declared tax-free from time to time under this section. (2) The State Government, after giving by notification not less than three months' notice of its intention so to do, may by like notification add to or delete from Schedule B and thereupon Schedule B shall be deemed to be amended accordingly." By Punjab Act No. 18 of 1960, clause (ff) of section 2 of the Act, which had undergone some alteration when Punjab Act No. 24 of 1959 came into force, was substituted by a new clause, which read: "2. (ff) 'Purchase', with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge;". The effect of the said amendment was that the turnover relating to the purchase of goods mentioned i....
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....ce could not be denied the benefit of section 5(2)(a)(ii) of the Act, which authorised the deduction from the gross turnover the turnover relating to the sales of paddy effected in their favour, notwithstanding the inclusion of paddy in Schedule C to the Act. The High Court rejected both the contentions of the appellants and dismissed the writ petitions. Hence these appeals under article 136 of the Constitution. In this Court also, the very same contentions which were urged before the High Court were urged in support of the appeals with some slight variations. The first contention urged by Mr. M. C. Bhandare, learned counsel for the appellants, was that section 31 of the Act, which authorised the State Government to vary Schedule C to the Act by adding certain goods whose turnover was not liable to payment of sales tax before, suffered from the vice of excessive delegation of legislative power and, in the alternative, he submitted that, even if the said provision was otherwise valid, it could not be interpreted as including within its scope the power to issue a notification which would run counter to the express legislative policy of the Act contained in section 5(2)(a)(ii) t....
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....er, of course, at any moment, of withdrawing or altering the power, which they have entrusted to him. In these circumstances, their Lordships are of the opinion that the judgment of the Supreme Court was wrong in declaring section 133 of the Customs Regulation Act of 1879 to be beyond the power of the legislature." In J. W. Hampton Jr. & Company v. United States (1927) 276 U.S. 394., the validity of the action of the President to make changes in the rates provided in the Tariff Act, 1922, under the power delegated by the Congress arose for consideration. That was challenged as a forbidden delegation of legislative power to the executive authority. The challenge was negatived by the Supreme Court of the United States on the ground that the Congress had laid down by legislative act an intelligible principle to which the person authorised to fix the rate of customs duties on imported merchandise was to conform. The principle enunciated in the above two decisions has been substantially adopted and followed by this Court in two cases: (1) Pandit Banarsi Das Bhanot v. State of Madhya Pradesh [1958] 9 S.T.C. 388 (S.C.); [1959] S.C.R. 427., and (2) Municipal Corporation of Delh....
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....tta v. Liberty Cinema [1965] 2 S.C.R. 477., where the majority upheld the fixation of a tax on cinema shows by the Corporation of Calcutta even though the Calcutta Municipal Act of 1951 prescribed no limits to which the tax could go. In that case, reliance was placed on the case of Pandit Banarsi Das Bhanot v. State of Madhya Pradesh [1958] 9 S.T.C. 388 (S.C.); [1959] S.C.R. 427., and it was held that the fixation of rate of tax could be left to a non-legislative body provided the legislature gave necessary guidance for such fixation. This Court in that case found guidance in the various provisions of the statute including the fact that the body which had been authorised to levy the rate was a municipal body whose fiscal requirements were restricted by the nature and area of its jurisdiction. In Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills, Delhi [1968] 3 S.C.R. 251 at 287., Hidayatullah, J. (as he then was), upholding the imposition of a tax by the Delhi Municipal Corporation in exercise of the power granted to it under the Delhi Municipal Corporation Act No. 66 of 1957, observed at page 287 as follows: "The doctrine that Parliament cannot delega....
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.... that whenever a statute defines the purpose or purposes for which a statutory authority is constituted and empowers it to levy a tax that statute necessarily contains a guidance to fix the rates ; it depends upon the provisions of each statute." In Sita Ram Bishambhar Dayal v. State of U.P. [1972] 29 S.T.C. 206 (S.C.); [1972] 2 S.C.R. 141., the validity of section 3-D(1) of the U.P. Sales Tax Act, 1948, which authorised the levy of a tax on the turn-over of first purchases made by a dealer or through a dealer acting as a purchasing agent in respect of such goods or class of goods, and at such rates, not exceeding two paise per rupee in the case of foodgrains, including cereals and pulses, and five paise per rupee in the case of other goods and with effect from such date, as may, from time to time, be notified by the State Government in that behalf, was questioned on the ground that the delegation of power to the State Government to determine the goods or class of goods whose purchase turnover would be liable to tax and the rates of purchase tax subject to the restriction imposed in that regard by that section suffered from the vice of excessive delegation. Repelling the above c....
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....y. But subject to that qualification, it is permissible for the legislature to delegate the power to select the persons on whom the tax is to be levied or the goods or the transactions on which the tax is to be levied. In the Act, under section 3, the legislature has sought to impose multi-point tax on all sales and purchases. After having done that it has given power to the executive, a high authority and which is presumed to command the majority support in the legislature, to select for special treatment dealings in certain class of goods. In the very nature of things, it is impossible for the legislature to enumerate goods, dealings in which sales tax or purchase tax should be imposed. It is also impossible for the legislature to select the goods which should be subjected to a single point sales or purchase tax. Before making such selections several aspects such as the impact of the levy on the society, economic consequences and the administrative convenience will have to be considered. These factors may change from time to time. Hence in the very nature of things, these details have got to be left to the executive." We shall now proceed to examine the validity of section 31 ....
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....t in case of such sales, a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing prescribed particulars on a prescribed form obtained from the prescribed authority is furnished by the dealer who sells the goods: (iii) ........................ (iv) sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910, of goods for use by it in the generation or distribution of such energy; (v) sales or purchases of goods falling under section 29; (vi) the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce or in the course of export out of the territory of India: Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claiming deduction. (vii) such other sales or purchases as may be prescribed; (b) the amount of sales tax included in the gross turnover....
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....ing entry in the second column thereof and no dealer shall charge sales tax on the sale of goods which are declared taxfree. In so far as goods included in Schedule C to the Act are concerned, tax can be levied only on their purchase turnover. In the case of all other goods, tax is levied on their sales turnover subject to section 5 and other provisions of the Act. When the State Government in exercise of its power under section 6(2) of the Act deletes any goods from Schedule B, they cease to be tax-free goods and their sales turnover would become liable to payment of tax. When the State Government in exercise of its power under section 31 of the Act includes any goods in Schedule C, their sales turnover would become exempt from payment of tax but their purchase turnover would become liable for payment of tax. We are of the view that the delegation of power to the State Government to determine whether any class of goods should be included or excluded from Schedule C to the Act cannot be considered as unconstitutional in view of the decisions of this Court referred to above and in particular the decision in Pandit Banarsi Das Bhanot v. State of Madhya Pradesh [1958] 9 S.T.C. 388 (S.....
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.... that, having regard to the scheme of the Act, it was necessary for us to read section 31 of the Act as not delegating the power to the State Government to include paddy in Schedule C to the Act. The argument of the learned counsel was that the appellants were purchasing paddy either from agriculturists who had grown it on their land or from katcha adatias for purposes of manufacture of rice in the circumstances mentioned in section 5(2)(a)(ii) of the Act. In either case, no sales tax was being levied on the turnover relating to the sales in their favour by reason of item 39 of Schedule B to the Act, which declared that agricultural or horticultural produce sold by a person or a member of his family grown by himself or grown on any land in which he has an interest whether as owner or usufructuary mortgagee, tenant or otherwise were tax-free goods or of sub-clause (ii) of clause (a) of sub-section (2) of section 5 of the Act which required the turnover relating to sales to a registered dealer of goods specified in his certificate of registration for use by him in the manufacture in Punjab of any goods other than goods declared tax-free under section 6 for sale in Punjab to be deduct....
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.... Bench of this Court in Pandit Banarsi Das Bhanot v. State of Madhya Pradesh [1958] 9 S.T.C. 388 (S.C.) ; [1959] S.C.R. 427., where it has been held that it is open to the legislature to delegate the power to withdraw the exemption which has been given by the legislature in respect of certain transactions specified in Schedule II to the C.P. and Berar Sales Tax Act, 1947. Moreover, it cannot be said that the principal object of the Act is to encourage manufacturing industry. The Act is a fiscal legislation and its object is to collect revenue for the purpose of meeting the expenditure of the Government. It is no doubt true that while levying tax under the Act, the legislature may grant exemptions in certain cases and may decline to grant exemptions in other cases. The question whether such exemption should be given or not is only incidental or ancillary to the principal object, viz., the object of levying tax for the purpose of collecting revenue. It cannot also be said that when certain goods are sold in favour of a manufacturer, the seller is always entitled to deduct such sales turnover from the gross turnover. He can do so only when such goods are specified in the certificat....