TaxTMI 
TaxTMI 
1983 (5) TMI 214
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....ppeal No. 2866, Civil Appeal No. 2867, Civil Appeal No. 2868, Civil Appeal No. 2869, Civil Appeal No. 2870, Civil Appeal No. 2871, Civil Appeal No. 2872, Civil Appeal No. 2873, Civil Appeal No. 2874, Civil Appeal No. 2875, Civil Appeal No. 2876, Civil Appeal No. 2877, Civil Appeal No. 2878, Civil Appeal No. 2879, Civil Appeal No. 2880, Civil Appeal No. 2881, Civil Appeal No. 2882, Civil Appeal No. 2883, Civil Appeal No. 2884, Civil Appeal No. 2885, Civil Appeal No. 2886, Civil Appeal No. 2887, Civil Appeal No. 2888, Civil Appeal No. 2889, Civil Appeal No. 2890, Civil Appeal No. 2891, Civil Appeal No. 2892, Civil Appeal No. 2893, Civil Appeal No. 2894, Civil Appeal No. 2895, Civil Appeal No. 2896, Civil Appeal No. 2897, Civil Appeal No. 2898, Civil Appeal No. 2899, Civil Appeal No. 2900, Civil Appeal No. 2901, Civil Appeal No. 2902, Civil Appeal No. 2903, Civil Appeal No. 2904, Civil Appeal No. 2905, Civil Appeal No. 2906, Civil Appeal No. 2907, Civil Appeal No. 2908, Civil Appeal No. 2909, Civil Appeal No. 2910, Civil Appeal No. 2911, Civil Appeal No. 2912, Civil Appeal No. 2913, Civil Appeal No. 2914, Civil Appeal No. 2915, Civil Appeal No. 2916, Civil Appeal No. 2917, Civil Appea....
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.....P. Nos. 1473 of 1983, Writ Petition No. 9266, Writ Petition No. 10055, Writ Petition No. 10056, Writ Petition No. 7002, Writ Petition No. 7003, Writ Petition No. 7004, Writ Petition No. 7005, Writ Petition No. 7006, Writ Petition No. 7007, Writ Petition No. 7008, Writ Petition No. 7009, Writ Petition No. 7019, Writ Petition No. 7020, Writ Petition No. 7021, Writ Petition No. 7022, Writ Petition No. 7023, Writ Petition No. 7024, Writ Petition No. 7921, Writ Petition No. 7922, Writ Petition No. 7996, Writ Petition No. 7997, Writ Petition No. 8508, Writ Petition No. 8509, Writ Petition No. 8510, Writ Petition No. 9680, Writ Petition No. 9681, Writ Petition No. 9682, Writ Petition No. 9683, Writ Petition No. 9684, Writ Petition No. 9685, Writ Petition No. 9686, Writ Petition No. 9687, Writ Petition No. 9688, Writ Petition No. 9689, Writ Petition No. 9690, Writ Petition No. 9691, Writ Petition No. 9692, Writ Petition No. 9322, Writ Petition No. 7647, Writ Petition No. 7648, Writ Petition No. 7649, Writ Petition No. 7650, Writ Petition No. 7651, Writ Petition No. 7652, Writ Petition No. 7653, Writ Petition No. 8005, Writ Petition No. 8067, Writ Petition No. 7160 of 1982, Writ Petition N....
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....x payable by a dealer whose gross turnover during a year exceeds Rs. 5 lakhs, in addition to the tax payable by him. The Act was reserved for the previous assent of the President and received his assent on April 20, 1981. There is no point raised as regards the validity of the notifications in question and therefore there is no need for us to deal with it. It will be convenient, having regard to the course taken in the arguments, to briefly refer to the facts as are discernible from the records in Civil Appeal No. 2567 of 1982-Messrs. Hoechst Pharmaceuticals Limited v. The State of Bihar, and Civil Appeal No. 3277 of 1982-Messrs. Glaxo Laboratories (India) Limited v. State of Bihar. Messrs. Hoechst Pharmaceuticals Limited and Messrs. Glaxo Laboratories (India) Limited are companies incorporated under the Companies Act, 1956, engaged in the manufacture and sale of various medicines and life saving drugs throughout India including the State of Bihar. They have their branch or sales depot at Patna registered as a dealer under section 14 of the Act and effect sales of their manufactured products through wholesale distributors or stockists appointed in almost all the districts of Bih....
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....86 respectively. There is excess payment of Rs. 55,383.98 in the assessment year 1980-81 and Rs. 13,112.35 in the year 1981- 82. These figures show the magnitude of the business carried on by these appellants in the State of Bihar alone and their capacity to bear the additional burden of surcharge levied under sub-section (1) of section 5 of the Act. The High Court referred to the decision in S. Kodar v. State of Kerala [1974] 34 STC 73 (SC); [1975] 1 SCR 121 where this court upheld the constitutional validity of sub-section (2) of section 2 of the Tamil Nadu Additional Sales Tax Act, 1970, which is in pari materia with sub-section (3) of section 5 of the Act and which interdicts that no dealer referred to in sub-section (1) shall be entitled to collect the additional tax payable by him. It held that the surcharge levied under sub-section (1) of section 5 is in reality an additional tax on the aggregate of sales effected by a dealer during a year and that it was not necessary that the dealer should be enabled to pass on the incidence of tax on sale to the purchaser in order that it might be a tax on the sale of goods. Merely because the dealer is prevented by sub-section (3) of ....
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....s that no dealer shall be entitled to collect the surcharge levied on him must therefore yield to section 6 of the Essential Commodities Act which provides that any order made under section 3 of the Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the Act or any instrument having effect by virtue of any enactment other than the Act. The entire submission proceeds on the doctrine of occupied field and the concept of federal supremacy. In short, the contention is that the Union power shall prevail in a case of conflict between List II and List III. (2) Sub-section (3) of section 5 of the Act which provides that no dealer shall be entitled to collect the amount of surcharge levied on him, clearly falls within entry 54 of List II of the Seventh Schedule and it collides with, and/or is inconsistent with, or repugnant to, the scheme of the Drugs (Price Control) Order, 1979, generally so far as price fixation of drugs is concerned and particularly with paragraph 21 which enables the manufacturer or producer of drugs to pass on the liability to pay sales tax to the consumer. If that be so, then there will be repugnancy between t....
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....ler as defined in section 2(j) to be the basis for the levy of a surcharge, i.e., inclusive of transactions relating to sale or purchase of goods which have taken place in the course of inter-State trade or commerce or outside the territory of India. Such transactions are outside the purview of the Act and therefore they cannot be taken into consideration for computation of the gross turnover as defined in section 2(j) of the Act for the purpose of bearing the incidence of surcharge. The contention to the contrary advanced by the learned Solicitor-General appearing on behalf of the State of Bihar is that there is no inconsistency between sub-section (3) of section 5 of the Act and paragraph 21 of the Control Order and both the laws are capable of being obeyed. According to him, the question of repugnancy under article 254(1) between a law made by Parliament and a law made by the State Legislature arises only in case both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List, and there is direct conflict between the two laws. It is only when both these requirements are fulfilled that the State law will, to the extent of repugn....
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....rs in other commodities. The case of such appellants would be squarely governed by the decision of this Court in S. Kodar's case [1974] 34 STC 73 (SC); [1975] 1 SCR 121, and their liability to pay surcharge under sub-section (1) of section 5 of the Act must be upheld, irrespective of the contentions raised in these appeals, based on the opening words "Subject to clauses (1) and (2)" in article 246(3) of the Constitution and on section 6 of the Essential Commodities Act. It is therefore necessary to first deal with the principles laid down in Kodar's case [1974] 34 STC 73 (SC); [1975] 1 SCR 121. In Kodar's case [1974] 34 STC 73 (SC); [1975] 1 SCR 121, this Court upheld the constitutional validity of the Tamil Nadu Additional Sales Tax Act, 1970, which imposes additional sales tax at 5 per cent on a dealer whose annual gross turnover exceeds Rs. 10 lakhs. The charging provision in sub-section (1) of section 2 of that Act is in terms similar to sub-section (1) of section 5 of the Act, and provides that the tax payable by a dealer whose turnover for a year exceeds Rs. 10 lakhs shall be increased by an additional tax at 5 per cent of the tax payable by him. Sub-section (2) of that Ac....
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....oses of levy of sales tax, aggregate of sale prices received and receivable by a dealer, during any given period, in respect of sale of goods (including the sale of goods made outside the State or in the course of inter-State trade or commerce or export) but does not include sale prices of goods or class or classes or description of goods which have borne the incidence of purchase tax under section 4." Sub-section (3) of section 5 of the Act, the constitutional validity of which is challenged, provides: "5. (3) Notwithstanding anything to the contrary contained in this Part, no dealer mentioned in sub-section (1), who is liable to pay surcharge shall be entitled to collect the amount of this surcharge." It is fairly conceded that not only sub-section (1) of section 5 of the Act which provides for the levy of surcharge on dealers whose gross turnover during a year exceeds Rs. 5 lakhs, but also sub-section 3 of section 5 of the Act which enjoins that no dealer who is liable to pay a surcharge under sub-section (1) shall be entitled to collect the amount of surcharge payable by him, are both relatable to entry 54 of List II of the Seventh Schedule which reads: "54. Taxes o....
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....ssential Commodities Act, 1955, provides for a comprehensive scheme of price fixation both as regards bulk drugs as well as formulations. The expressions "bulk drug" and "formulation" are defined in parapraph 2(a) and 2(f) as: "2. In the order, unless the context otherwise requires,- (a) 'bulk drug' means any substance including pharmaceutical, chemical, biological or plant product or medicinal gas conforming to pharmacopoeal or other standards accepted under the Drugs and Cosmetics Act, 1940, which is used as such or as an ingredient in any formulations; (f) 'formulation' means a medicine processed out of, or containing one or more bulk drug or drugs, with or without the use of any pharmaceutical aids for internal or external use for, or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals, but shall not include- * * *" We are here concerned with the impact of sub-section (3) of section 5 of the Act on the price structure of formulations, but none the less much stress was laid on fixation of price of bulk drugs under paragraph 3(2) which allows a reasonable return to the manufacturer under sub-paragraph (3) thereof. A manufactu....
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....alt with in paragraph 11 and it provides: "11. Mark-up referred to in paragraph 10 includes the distribution cost, outward freight, promotional expenses, manufacturers' margin and the trade commission and shall not exceed- (i) forty per cent in the case of formulations specified in Category I of the Third Schedule; (ii) fifty-five per cent in the case of formulations specified in Category II of the said schedule; (iii) one hundred per cent in the case of formulations specified in Category III of the said schedule." It is unnecessary for our purposes to reproduce the provisions of paragraph 12 to 14 which formulate a detailed scheme of price fixation. Paragraph 15 confers power of revision of prices and it reads: "15. Power to revise prices of formulations.-Notwithstanding anything contained in this Order: (a) The Government may, after obtaining such information as it may consider necessary from a manufacturer or an importer, fix or revise the retail price of one or more formulations marketed by such manufacturer or importer, including a formulation not specified in any of the categories of the Third Schedule, in such manner as the pre-tax return on the sales....
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....xceed' preceding it, and 'local taxes extra' succeeding it." "21. Control of sale prices of formulations specified in Third Schedule.-No retailer shall sell any formulation specified in any of the categories in the Third Schedule to any person at a price exceeding the price specified in the current price list or the price indicated on the label of the container or pack thereof, whichever is less, plus the local taxes, if any, payable. Explanation.-For the purpose of this paragraph, 'local taxes' include sales tax and octroi actually paid by the retailer under any law in force in a particular area." "24. Price to the wholesaler and retailer.-(1) No manufacturer, importer or distributor shall sell a formulation to a wholesaler unless otherwise permitted under the provisions of this Order or any other order made thereunder at a price higher than: (a) the retail price minus 14 per cent thereof, in the case of ethical drugs, and (b) the retail price minus 12 per cent thereof, in the case of non-ethical drugs. (2) No manufacturer, importer, distributor or wholesaler shall sell a formulation to a retailer unless otherwise permitted under the provisions of this Ord....
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....st to a manufacturer who employs efficient methods and allowing a reasonable return on the net-worth of the drug manufactured. Otherwise, every manufacturer will show a figure as cost of production, which may not be acceptable. The average cost of production of an efficient manufacturer is made the standard for fixing the price but such fixation of the price of a bulk drug allows a reasonable return to the manufacturer. Under sub-paragraph (3) the manufacturer or producer of such bulk drug is entitled to sell it at a price not exceeding the price so fixed plus local tax, if any, payable. Much stress is laid that the average cost of an efficient manufacturer allows a reasonable return on the net-worth of the drug manufactured and the price so fixed is exclusive of local taxes, i.e., sales tax. It is further urged that the term "local taxes" in sub-paragraph (3) means and includes sales tax leviable in a State and attention is drawn to the explanation to paragraph 21 for that purpose. We fail to appreciate the relevance of sub-paragraph (3) of paragraph 3 which relates to a manufacturer or producer of bulk drugs or of paragraph 21 of the Control Order which fixes the controlled pr....
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....urcharge and therefore it is constitutionally void. It is said that the courts should try to adopt the rule of harmonious construction and give effect to paragraph 21 of the Control Order as the impact of sub-section (3) of section 5 of the Act is on fixation of price of drugs under the Drugs (Price Control) Order and therefore by reason of section 6 of the Essential Commodities Act, paragraph 21 of the Control Order which provides for the passing on of tax liability must prevail. The submission rests on a construction of article 246(3) of the Constitution and it is said that the power of the State Legislature to enact a law with respect to any subject in List II is subject to the power of Parliament to legislate with respect to matters enumerated in Lists I and III. It is convenient at this stage to deal with the contention of the appellants that if sub-section (3) of section 5 of the Act were to cover all sales including sales of essential commodities whose prices are controlled by the Central Government under the various control orders issued under sub-section (1) of section 3 of the Essential Commodities Act, then there will be repugnancy between the State law and such contr....
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....or distributor is inclusive of sales tax. There being no conflict between sub-section (3) of section 5 of the Act and paragraph 24 of the Control Order, the question of non obstante clause to section 6 of the Essential Commodities Act coming into play does not arise. Even otherwise, i.e., if some of the appellants were governed by paragraph 21 of the Control Order, that would hardly make any difference. Under the scheme of the Act, a dealer is free to pass on the liability to pay sales tax payable under section 3 and additional sales tax payable under section 6 to the purchasers. Sub-section (3) of section 5 of the Act however imposes a limitation on dealers liable to pay surcharge under sub-section (1) thereof from collecting the amount of surcharge payable by them from the purchasers which only means that surcharge payable by such dealers under sub-section (1) of section 5 of the Act will cut into the profits earned by such dealers. The controlled price or retail price of medicines and drugs under paragraph 21 remains the same, and the consumer's interest is taken care of inasmuch as the liability to pay surcharge under sub- section (3) of section 5 cannot be passed on. Tha....
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....st'). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the 'Concurrent List'). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List'). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List." It is obvious that article 246 imposes limitations on the legislative powers of the Union and State Legislatures and its ultimate analysis would reveal the following essentials: 1.. Parliament has exclusive power to legislate with respect to any of the matters enumerated in List I notwithstanding anything contained in clauses (2) and (3). The non obstante clause in article 246(1) provides for predominance or suprema....
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....isting law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State." We find it difficult to subscribe to the proposition advanced on behalf of the appellants that merely because of the opening words of article 246(3) of the Constitution "Subject to clauses (1) and (2) " and the non obstante clause in article 246(1) "Notwithstanding anything in clauses (2) and (3)", sub-section (3) of section 5 of the Act which provides that no dealer shall be entitled to collect the amount of surcharge must be struck down as ultra vires the State Legislature inasmuch as it is in consistent with paragraph 21 of the Drugs (Price Control) Order issued by the Central Government under sub-section (1) of section 3 of the Essential Commodities Act which enables the manufacturer or producer of drugs to pass on the liabilit....
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.... The Union and State Legislatures have concurrent power with respect to subjects enumerated in List III, subject only to the provision contained in clause (2) of article 254, i.e., provided the provisions of the State Act do not conflict with those of any Central Act on the subject. However, in case of repugnancy between a State Act and a Union Law on a subject enumerated in List III, the State law must yield to the Central law unless it has been reserved for the assent of the President and has received his assent under article 254(2). As regards the distribution of legislative powers between the Union and the States article 246 adopts with immaterial alterations the scheme for the distribution of legislative powers contained in section 100 of the Government of India Act, 1935. Our Constitution was not written on a clean slate because a Federal Constitution had been established by the Government of India Act, 1935, and it still remains the framework on which the present Constitution is built. The provisions of the Constitution must accordingly be read in the light of the provisions of the Government of India Act, 1935, and the principles laid down in connection with the nature a....
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....ssary, modified by that of the other. In this way it may, in most cases, be found possible to arrive at a reasonable and practical construction of the language of the sections, so as to reconcile the respective powers they contain and to give effect to all of them." Earl Loreburn, L.C., delivering the judgment of the Judicial Committee in Attorney-General for the Province of Ontario's case [1912] AC 571 observed that in the interpretation of sections 91 and 92 of the British North America Act: "If the text is explicit, the text is conclusive, alike for what it directs and what it forbids." When the text is ambiguous, as for example when the words establishing two mutually exclusive jurisdictions are wide enough to bring a particular power within either, recourse must be had to the context and scheme of the Act. In A.L.S.P.P.L. Subrahmanyan Chettiar v. Muthuswami Goundan [1940] FCR 188 Gwyer, C.J., reiterated that the principles laid down by the Privy Council in a long line of decisions in the interpretation of sections 91 and 92 of the British North America Act, 1867, must be accepted as a guide for the interpretation of section 100 of the Government of India Act, 1935: ....
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....rdships do not hesitate to apply in the present case, that it is not the name of the tax but its real nature, its 'pith and substance' as it has sometimes been said, which must determine into what category it falls." Their Lordships approved of the decision of the Federal Court in Province of of Madras v. Boddu Paidanna & Sons [1942] 1 STC 104 (FC); [1942] FCR 90, where it was held that when there were apparently conflicting entries the correct approach to the question was to see whether it was possible to effect a reconcilia- tion between the two entries so as to avoid a conflict and overlapping. In Prafulla Kumar Mukherjee v. Bank of Commerce Ltd., Khulna AIR 1947 PC 60 at 65 Lord Porter delivering the judgment of the Board laid down that in distinguishing between the powers of the divided jurisdictions under Lists I, II and III of the Seventh Schedule to the Government of India Act, 1935, it is not possible to make a clean cut between the powers of the various legislatures. They are bound to overlap from time to time, and the rule which has been evolved by the Judicial Committee whereby an impugned statute is examined to ascertain its pith and substance or its true char....
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.... nature is not covered with Provincial matters, but the question is not, has it trespassed more or less, but is the trespass, whatever it be, such as to show that the pith and substance of the impugned Act is not money-lending but promissory notes or banking? Once that question is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content." The passage quoted above places the precedence accorded to the three lists in its proper perspective. In answering the objection that that view does not give sufficient effect to the non obstante clause in section 100(1) of the Government of India Act, 1935, as between the three lists, the Privy Council observed: "Where they come in conflict, List I has priority over Lists III and II and List III has priority over List II." But added: "The priority of the Federal Legislature would not prevent the Provincial Legislature from dealing with any matter within List II though it may inciden- tally affect any item in List I." It would therefore appear that the constitutionality of the law is to be judged by its real subject-matter and not by its incidental effect on any ....
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.... the entire argument of learned counsel for the appellants proceeds is based upon the dictum of Lord Dunedin in Grant Trunk Railway Company's case [1907] AC 65: "4. There can be a domain in which Provincial and Dominion legislation may overlap, in which case neither legislation will be ultra vires if the field is clear, but if the field is not clear and the two legislations meet, the Dominion legislation must prevail: see Grand Trunk Railway of Canada v. Attorney-General of Canada [1907] AC 65." The question is whether the field is not clear and the two legislations meet and therefore on the doctrine of Federal supremacy sub-section (3) of section 5 of the Act must be struck down as ultra vires. The principle deducible from the dictum of Lord Dunedin as applied to the distribution of legislative powers under article 246 of the Constitution is that when the validity of an Act is challenged as ultra vires, the answer lies to the question, what is the pith and substance of the impugned Act? No doubt, in many cases it can be said that the enactment which is under consideration may be regarded from more than one angle and as operating in more than one field. If, however, the matte....
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....Central Government under sub- section (1) of section 3 of the Essential Commodities Act which is relatable to entry 33 of List III. It is sought to be argued that the words "a law made by Parliament which Parliament is competent to enact" must be construed to mean not only a law made by Parliament with respect to one of the matters enumerated in the Concurrent List but they are wide enough to include a law made by Parliament with respect to any of the matters enumerated in the Union List. The argument was put in this form. In considering whether a State law is repugnant to a law made by Parliament, two questions arise: First, is the law made by Parliament, viz., the Essential Commodities Act, a valid law. For, if it is not, no question of repugnancy to a State law can arise. If however it is a valid law, the question as to what constitutes repugnancy directly arises. The second question turns on a construction of the words "a law made by Parliament which Parliament is competent to enact" in article 254(1). Strong reliance is placed on the judgment of the High Court of Australia in Clyde Engineering Company Limited v. Cowburn (1926) 37 Com LR 466 and to a passage in Australian....
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....wers over the same subject- matter." In Ch. Tika Ramji v. State of Uttar Pradesh [1956] SCR 393 the court accept- ed the above three rules evolved by Nicholas, among others, as useful guides to test the question of repugnancy. We may briefly refer to the three Australian decisions relied upon. As already stated, the decision in Clyde Engineering Company's case (1926) 37 Com LR 466, per illuminating judgment of Issacs, J., lays down that inconsistency is also created when one statute takes away rights conferred by the other. Dixon, J, in Ex parte McLean's case (1930) 43 Com LR 472 laid down another test, viz., two statutes could be said to be inconsistent if they, in respect of an identical subject-matter, imposed identical duty upon the subject, but provided for different sanctions for enforcing those duties. In Stock Motor Ploughs Limited's case (1932) 48 Com LR 128, Evatt, J., held that even in respect of cases where two laws impose one and the same duty of obedience there may be inconsistency. As already stated, the controversy in these appeals falls to be determined by the true nature and character of the impugned enactment, its pith and substance, as to whether it fal....
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....made by Parliament or (b) an existing law. It is now settled that the words "with respect to" qualify both the clauses in article 254(1), viz., a law made by Parliament which Parliament is competent to enact as well as any provision of an existing law. The underlying principle is that the question of repugnancy arises only when both the legislatures are competent to legislate in the same field, i.e., with respect to one of the matters enumerated in the Concurrent List. Hence, article 254(1) cannot apply unless both the Union and the State laws relate to a subject specified in the Concurrent List, and they occupy the same field. This construction of ours is supported by the observations of this Court in A.S. Krishna v. State of Madras [1957] SCR 399 while dealing with section 107(1) of the Government of India Act, 1935, to the effect: "For this section to apply, two conditions must be fulfilled: (1) The provisions of the Provincial law and those of the Central legislation must both be in respect of a matter which is enumerated in the Concurrent List, and (2) they must be repugnant to each other. It is only when both these requirements are satisfied that the Provincial la....
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....of essential commodities is an occupied field covered by a Central legislation. It is axiomatic that the power of the State Legislature to make a law with respect to the levy and imposition of a tax on sale or purchase of goods relatable to entry 54 of List II of the Seventh Schedule and to make ancillary provisions in that behalf, is plenary and is not subjected to the power of Parliament to make a law under entry 33 of List III. There is no warrant for projecting the power of Parliament to make a law under entry 33 of List III into the State's power of taxation under entry 54 of List II. Otherwise, entry 54 will have to be read as: "Taxes on the sale or purchase of goods other than essential commodities et cetera." When one entry is made "subject to" another entry, all that it means is that out of the scope of the former entry, a field of legislation covered by the latter entry has been reserved to be specially dealt with by the appropriate legislature. Entry 54 of List II of the Seventh Schedule is only subject to entry 92-A of List I and there can be no further curtailment of the State's power of taxation. It is a well-established rule of construction that the entries in the th....
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....r Federal Constitutions from overlapping powers of taxation. It would therefore appear that there is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. In M.P. Sundararamier & Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC); [1958] SCR 1422 this Court dealt with the scheme of the separation of taxation powers between the Union and the States by mutually exclusive lists. In List I, entries 1 to 81 deal with general subjects of legislation; entries 82 to 92-A deal with taxes. In List II, entries 1 to 44 deal with general subjects of legislation; entries 45 to 63 deal with taxes. This mutual exclusiveness is also brought out by the fact that in List III, the Concurrent Legislative List, there is no entry relating to a tax, but it only contains an entry relating to levy of fees in respect of matters given in that list other than court-fees. Thus, in our Constitution, a conflict of the taxing power of the Union and of the States cannot arise. That being so, it is difficult to comprehend the submission that there can be intrusion by a law mad....
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....ed on the basis that each of the appellants was a dealer having a gross turnover of Rs. 5 lakhs or more in a year and therefore liable to pay surcharge, in addition to the tax payable by him, under sub-section (1) of section 5 of the Act. It is lamentable that there is no factual foundation laid to support the contention that the levy of surcharge under sub-section (1) of section 5 of the Act imposes a disproportionate burden on a certain class of dealers such as manufacturers or producers of drugs and pharmaceuticals or dealers engaged in the business of distribution and sale of motor-trucks, etc., to support the assertion that sub-section (3) of section 5 of the Act which prohibits such persons from passing on the liability to pay surcharge is arbitrary or irrational, or that it treats "unequals as equals" and thus infringes article 14 of the Constitution or is confiscatory in nature. There is no ground whatever for holding that sub-section (3) of section 5 of the Act is arbitrary or irrational or that it treats "unequals as equals", or that it imposes a disproportionate burden on a certain class of dealers. It must be remembered that sub-section (1) of section 5 of the Act pr....
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.... of such magnitude that they have the capacity to bear the additional burden of surcharge levied under sub-section (1) of section 5 of the Act. It roughly works out to one paisa per rupee of the sale price of the manufactured commodity. There is no material placed on record that the surcharge levied under sub-section (1) of section 5 of the Act imposes a disproportionate burden on the appellants or that it is confiscatory in nature. The argument of arbitrariness is an argument of despair. Sub-section (1) of section 5 of the Act levies surcharge on dealers, whose gross turnover in a year exceeds Rs. 5 lakhs irrespective of whether such dealers deal in essential commodities or not. It is a general tax and all dealers falling within the class defined under sub-section (1) of section 5 of the Act have been levied the surcharge at a uniform rate of 10 per centum of the tax. It will be noticed that the first proviso to sub-section (1) of section 5 enjoins that the aggregate of the tax and surcharge payable under the Act shall not exceed, in respect of goods declared to be of special importance in inter-State trade or commerce by section 14 of the Central Sales Tax Act, 1956, the rate ....
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....fied in category (iii). This gives an indication of the extent of profits earned by the manufacturers and producers of formulations. If the appellants find that the levy of surcharge under sub-section (1) of section 5 of the Act cannot be borne within the present price structure of medicines and drugs, they have the right to apply to the Central Government for revision of the retail price of formulations under paragraph 15 of the Control Order. They can also claim to be compensated for the shortfall from the Drugs Prices Equalisation Account, if permissible. We need only draw attention in this connection to a recent article "Druggists to the Third World" which has appeared in the Economist of March 12-18, 1983, which indicates the extent to which the 100 or so multi-nationals dominate the international medicines trade, the dependence of the third world countries and the problems facing India which now has one of the more elaborate drug industries of the world. It reveals that the multi-nationals have exploited their monopoly power in the absence of regulations in some third world countries to charge outrageous prices for medicines and life saving drugs. This only shows their capaci....
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.... the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provision for sellers to collect the tax from the purchasers. Whether a law should be enacted, imposing a sales tax, or validating the imposition of sales tax, when the seller is not in a position to pass it on to the consumer, is a matter of policy and does not affect the competence of the legislature: see Tata Iron & Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267 (SC); [1958] SCR 1355, J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429 (SC); [1962] 2 SCR 1 and S. Kodar v. State of Kerala [1974] 34 STC 73 (SC); [1975] 1 SCR 121. The contention based on article 19(1)(g) cannot therefore be sustained. There was quite some discussion at the Bar as to whether the assent of the President is justiciable. It was submitted that since not only sub-section (1) of section 5 of the Act which provides for the levy of a surcharge on dealers having a gross turnover of Rs. 5 lakhs in a year but also sub-section (3) thereof which interdicts that no such dealer shall be entitled to recover the amount of surcharge collected from him, are both relatable to entry 54 of List I....
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....the President, in which case the President will adopt the procedure laid down in article 201. The first proviso to article 200 deals with a situation where the Governor is bound to give his assent and the Bill is reconsidered and passed by the Assembly. The second proviso to that article makes the reservation for the consideration of the President obligatory where the Bill would, "if it becomes law, derogate from the powers of the High Court". Under article 201, when a Bill is reserved by the Governor for the consideration of the President, the President can adopt two courses, namely: (1) He may give his assent to it in which case again the Bill becomes a law; or (2) He may except where the Bill is not a "Money Bill", direct the Governor to return the Bill to the House or, as the case may be, the Houses of the Legislature of the State together with such message as is mentioned in the first proviso to article 200. When a Bill is so reserved by the President, the House or Houses shall reconsider it accordingly within a period of six months from the date of receipt of such message and if it is again passed by the House or Houses with or without amendment, it shall be prese....
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.... to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed." The submission appears to proceed on a misapprehension of the principles laid down in Fernandez's case [1957] 8 STC 561 (SC); [1957] SCR 837. 'To understand the ratio deducible in Fernandez's case [1957] 8 STC 561 (SC); [1957] SCR 837, a few facts have to be stated. The business of the assessee in that case consisted in the purchase of copra, manufacture of coconut oil and cake therefrom and sale of oil and cake to parties inside the State and sa....
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....ude them in computation of the turnover liable to tax thereunder, observed: "This position is not at all affected by the provisions with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of article 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer's turnover. Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of article 286 of the Constitution and the corresponding provision enacted in the Act, as above." The decision in Fernandez's case [1957] 8 STC 561 (SC); [1957] SCR 837 is therefore clearly an authority for the proposition that the State Legislature notwithstanding article 286 of the Constitution while making a law under entry 54 of List II of the Seventh Schedule can, for purposes of the registration of a dealer and submission of returns of sales tax, include the transactions cove....