TaxTMI 
TaxTMI 
1983 (10) TMI 230
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.... a shop of sweetmeats, namkin, kachauri, puri, etc., at Daraganj, Allahabad, as also in Magh Mela. The assessee did not maintain any accounts, and on the basis of the decision of the Supreme Court in the case of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC); AIR 1978 SC 1591 claimed exemption from payment of tax. The assessee declared a nil turnover. The assessing authority repelled the contention of the assessee and on the basis of a best of judgment assessment assessed the assessee on a turnover of Rs. 4,50,000. The assessee preferred an appeal but the Assistant Commissioner (Judicial) dismissed the appeal and upheld the turnover determined by the assessing authority. The assessee preferred a second appeal and the Tribunal partly allowed the appeal and reduced the turnover to Rs. 2,65,000. The Tribunal found that during the surveys conducted on 29th August, 1976, and 8th October, 1976, at the assessee's shop at Daraganj stocks of sweetmeats, namkin, coca-cola, etc., besides raw materials were found. The Tribunal found that the assessee did not maintain any account. The Tribunal found that the assessee admitted daily sales at Rs. 25 to ....
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.... years 1974-75, 1975-76 and 1978-79 the assessee was given exemption from payment of tax on the basis of the decision of the Supreme Court in the case of Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi [1978] 42 STC 386 (SC); AIR 1978 SC 1591. The Tribunal found that the assessee provided the services of bearers, radio fans, etc., and made seating arrangements during the aforesaid years and as such the assessee must have continued to provide those services to their customers during the assessment years in question as well. The Tribunal found that the department has adduced no evidence to the contrary. Accordingly, the Tribunal, as said above, partly allowed the appeals. Aggrieved, the Commissioner has filed the revisions. One common question, in all these revisions, is whether the assessees are liable to pay sales tax on their transactions of supply of food stuffs, etc., to their customers which are exigible to payment of sales tax on their turnover of sales. The assessees contend that what the assessees, who are the restaurant owners, are doing, was not effecting sales to their customers but were rendering services to their customers and sales were only i....
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....ate of the judgment in the Associated Hotels of India case [1972] 29 STC 474 (SC) and the commencement of the present Amendment Act if the conditions mentioned in sub-clause (2) of clause 6 of the Bill are satisfied. In the case of food or drink supplied by restaurants this relief will be available only in respect of the period after the date of judgment in the Northern India Caterers (India) Limited case [1978] 42 STC 386 (SC) and the commencement of the present Amendment Act." The amendments with which we are concerned at present, are the amendment of article 366 of the Constitution which is a definition clause by which a new clause (29A) has been inserted. The relevant part of clause (29A) inserted in article 366 of the Constitution, reads as under: "(29A) 'tax on the sale or purchase of goods' includes- (a) ............................................. (b) ............................................. (c) ............................................. (d) ............................................. (e) ............................................. (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, b....
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....ntinued in any court or before any tribunal or authority for the refund of, and no enforcement shall be made by any court, tribunal or authority of any decree or order directing the refund of, any such aforesaid tax which has been collected; (iii) recoveries shall be made in accordance with the provisions of such law of all amounts which would have been collected thereunder as such aforesaid tax if this section had been in force at all material times. (2) Notwithstanding anything contained in sub-section (1), any supply of the nature referred to therein shall be exempt from the aforesaid tax- (a) where such supply has been made, by any restaurant or eating house (by whatever name called), at any time on or after the 7th day of September, 1978, and before the commencement of this Act and the aforesaid tax has not been collected on such supply on the ground that no such tax could have been levied or collected at that time; or (b) where such supply, not being any such supply by any restaurant or eating house (by whatever name called), has been made at any time on or after the 4th day of January, 1972, and before the commencement of this Act and the aforesaid tax has not be....
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....variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge. Explanation I.-A transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains a tittle to any goods as security for payment of the price, be deemed to be a sale." There were originally three explanations but the two explanations, namely, explanations II and III, have since been deleted. The rest of the sub-section is the same as originally enacted by the legislature except for the words "and includes forward contracts" have since been deleted. The word "turnover" is defined in section 2(i) of the U.P. Sales Tax Act, 1948, as under: "2. (i) 'turnover' means the aggregate amount for which goods are supplied or distributed by way of sale or are sold, by a dealer either directly or through another, on his account or on account of others, whether for cash or deferred payment or other valuable consideration. Explanation II.-Subject to such conditions and restrictions, if any, as may be prescribed in this behalf,....
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....Entry 22 runs as follows: "22. Sweetmeats, namkin, cooked food, confectionery, rewari, gajak, biscuits, bread, cakes, pastries, buns, jams, jellies, murabbas, gulkand, churan, chatni and achar, when sold loose or unpacked." The State is entrusted with the powers to levy taxes on the sale and purchase of goods by entry 54 of List II of the Seventh Schedule. It runs as follows: "54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I." The Statement of Objects and Reasons to the Amendment Act states that the phrase "sale of goods" has been interpreted by the Supreme Court as connoting only those sales which come within the meaning of the Sale of Goods Act, 1930. The amendment which has now been made by way of addition of a new clause (29A) in article 366 of the Constitution which is a definition clause, is that the phrase "tax on the sale or purchase of goods" in the Constitution will include certain heads of taxation which had been held to be outside the scope of entry 54 of List II of the Seventh Schedule and to include a tax on the supply by way of or as part of any service or in any other manner whatsoever....
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....rnment. On the words used in the Act, it is plain that the legislature attempted to overrule or set aside the decision of this court. That, in our judgment, is not open to the legislature to do under our constitutional scheme. It is open to the legislature within certain limits to amend the provisions of an Act retrospectively and to declare that the law shall be deemed to have been, but it is not open to the legislature to say that a judgment of a court properly constituted and rendered in exercise of its powers in a matter brought before it shall be deemed to be ineffective and the interpretation of the law shall be otherwise than as declared by the court. 11.. This Court in Amalgamated Coalfields Ltd.'s case [1963] Supp 1 SCR 172; AIR 1964 SC 1013 held that the cess was not validly imposed and levied because the sanction of the State Government was not obtained at the time of enhancing the rate of levy of tax. That judgment was binding between the parties and also by virtue of article 141 binding on all courts in the territory of India. The legislature could not say that declaration of law was either erroneous, invalid or ineffective either as a precedent or between the parti....
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....ment of Sri J.C. Bhardwaj that Parliament could not legislate in respect of a tax on the sale or purchase of goods because that subject is covered by entry 54 of List II of the Seventh Schedule cannot be accepted because the amendment that has been made by Parliament is under its constituent powers under article 368 of the Constitution. Clause (1) of article 368 of the Constitution provides that notwithstanding anything in this Constitution, Parliament may in exercise of its constituent powers amend by way of addition, variation or repeal any provision of this Constitution in accordance with the procedure laid down in this article. Thus, notwithstanding the fact that under entry 54 of List II of the Seventh Schedule, taxes on sale or purchase of goods is within the legislative competence of the State Legislature, Parliament was competent to legislate in respect of taxes on sale or purchase of goods in its constituent powers and widen the scope of entry 54 of List II of the Seventh Schedule by adding clause 29A in article 366 of the Constitution as also by providing for certain consequences of the amendment by section 6 of the Amendment Act. The Supreme Court in the case of Sasan....
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....er article 368 validate a State law, it seems to us that the entire submission proceeds on a misconception arising from failure to distinguish between a law made in exercise of legislative power and the law made in exercise of the constituent power. When article 31B was introduced in the Constitution by the Constitution (First Amendment) Act, 1951, it validated retrospectively 13 Acts specified in the Ninth Schedule, which, but for this provision, were liable to be impugned under article 13(2). Article 31B conferred constitutional immunity to such laws (all being enactments of State Legislatures) and Parliament alone could have done so by inserting the said article in the Constitution in exercise of its constituent power under article 368. In substance and reality it was a constitutional device employed to protect State laws from becoming void under article 13(2). It will appear clear that the language in article 31B is virtually lifted from article 13(1) and (2), while article 13(2) invalidates legislation, which takes away or abridges the rights conferred by Part III, article 31B extends 'protective umbrella' to such legislation if it is included in the Ninth Schedule, and theref....
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....made, before the commencement of this Act, in pursuance of any such provision, in which the phrase "tax on the sale or purchase of goods" occurs, it obviously contemplates a law made or purporting to have been made under the provisions of the Constitution and of no other. Taxes on the sale of goods and advertisements was a legislative head of a State by virtue of entry 48 of List II of the Seventh Schedule of the Government India Act, 1935. There are numerous Sales Tax Acts in force some of which are pre-Constitution and some of which are post-Constitution. A few of the preConstitution Sales Tax Acts are Bihar Sales Tax Act, 1947; U.P. Sales Tax Act, 1948; Punjab General Sales Tax Act, 1948; Bengal Finance (Sales Tax) Act, 1941; Orissa Sales Tax Act, 1947; East Punjab General Sales Tax Act, 1948; Assam Sales Tax Act, 1947, and Madras General Sales Tax Act, 1939. Post-Constitution Sales Tax Acts are Bombay Sales Tax Act, 1959; Gujarat Sales Tax Act, 1970; Karnataka Sales Tax Act, 1957; Kerala General Sales Tax Act, 1963 and Rajasthan Sales Tax Act, 1954. In his very able argument, Sri A.P. Misra, the learned standing counsel, has argued, in reply, that in the Statement of Obje....
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.... that it is said to be the duty of the judge to make such construction of a statute as shall suppress the mischief and advance the remedy. To this end, a certain extension of the letter is not unknown, even in criminal statutes. Sri A.P. Misra has then referred to a decision of the Supreme Court in the case of State of Bihar v. Sir Kameshwar Singh AIR 1952 SC 252, wherein the Supreme Court, at page 285, in paragraph 95, has observed as follows: "This obligation to provide for compensation is no doubt one of the provisions of article 31(2) but if, as contended by Mr. P.R. Das, the self-same provision be found elsewhere in the same Constitution, e.g., entry 36 in List II or entry 42 in List III, then that 'provision' must also be regarded as having been covered by article 31(4) and the two added articles for otherwise those articles will be rendered nugatory. In my opinion, if, two constructions are possible, the court should adopt that which will implement and discard that which will stultify the apparent intention of the makers of the Constitution. Further, it must be borne in mind that article 31(4) which applies 'notwithstanding anything in this Constitution' will, by force....
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....w to enhance the revenue of the States, and therefore, Parliament enacted the Amendment Act. For this reason, Sri A.P. Misra urges that sub-section (1) of section 6 of the Amendment Act should be read as covering both pre-Constitution laws and post-Constitution laws. The argument on behalf of the assessee is that the language of sub-section (1) of section 6 of the Amendment Act is clear and unambiguous and as such it is not permissible for this Court to interpret it in a manner which is not consistent with the language of the statute after taking into account the Statement of Objects and Reasons as being sought to be done by the learned standing counsel. Several cases have been relied upon and some of them are referred to here. One of the cases is Commissioner of Sales Tax, U.P., Lucknow v. Parson Tools and Plants, Kanpur [1975] 35 STC 413 (SC); (1975) 4 SCC 22. In paragraph 15 of the judgment it was observed as follows: "Be that as it may, from the scheme and language of section 10, the intention of the legislature to exclude the unrestricted application of the principles of sections 5 and 10 of the Limitation Act is manifestly clear. These provisions of the Limitation Ac....
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.... based on the Statement of Objects and Reasons, there is a decision of the Supreme Court in the case of Aswini Kumar Ghose v. Arbinda Bose AIR 1952 SC 369 which ruled out such a reference. Patanjali Sastri, C.J., in paragraphs 32 and 33 of the judgment observed as follows: "32. As regards the propriety of the reference to the Statement of Objects and Reasons, it must be remembered that it seeks only to explain what reasons induced the mover to introduce the Bill in the House and what objects he sought to achieve. But those objects and reasons may or may not correspond to the objective which the majority of members had in view when they passed it into law. The Bill may have undergone radical changes during its passage through the House or Houses, and there is no guarantee that the reasons which led to its introduction and the objects thereby sought to be achieved have remained the same throughout till the Bill emerges from the House as an Act of the Legislature, for they do not form part of the Bill and are not voted upon by the members. We, therefore, consider that the Statement of Objects and Reasons appended to the Bill should be ruled out as an aid to the construction of a st....
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....ent rule against reference to the Statement of Objects and Reasons laid down in Aswini Kumar Ghose v. Arbinda Bose AIR 1952 SC 369 has been diluted by the decision given in the aforesaid case. In the case of S. Narayanaswami v. G. Panneerselvam AIR 1972 SC 2284 the Supreme Court while construing article 171 of the Constitution, observed in paragraph 13 as follows: "13. It may be possible to look for legislative intention in materials outside the four corners of a statute where its language is really ambiguous or conflicting. But, where no such difficulty arises, the mere fact that the intentions of the law-makers, sought to be demonstrated by what was said by some of them or by those advising them when the Constitution was on the anvil were really different from the result which clearly follows from the language used in the legislative provisions under consideration, could not authorise the use of such an exceptional mode of construction. 'It is well accepted', said Lord Morris (see Davies, Jenkins & Co. v. Davies [1967] 2 WLR 1139 at page 1156), 'that the beliefs and assumptions of those who frame Acts of Parliament cannot make the law'. " Again, in paragraph 19, the cour....
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.... The opening part of sub-section (1) of section 6 provides that the expression "tax on the sale or purchase of goods" wherever it is used in the Constitution and for the purpose of any law passed or made, or purporting to have been passed or made, before the commencement of the Amendment Act, shall be deemed to include, and always to have included, clauses (a) and (b) thereof. It seems that the words "in pursuance" in sub-section (1) qualifies the phrase "for the purposes of any law passed or made, or purporting to have been passed or made, before the commencement of this Act" under the provisions relating to "tax on the sale or purchase of goods" and to no other. The phrase "before the commencement of this Act" in sub-section (1) does not mention any earlier date and is completely unqualified. It has been argued that it means a period anterior in time of the coming into force of the Constitution itself. On the other hand, the assessees urged that the phrase "before the commencement of this Act" referred to the point of time when the Constitution itself came into force. Prior to coming into force of the Constitution, the Government of India Act, 1935, under entry 48 of ....
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....given by the Supreme Court in the cases of Associated Hotels of India Ltd. [1972] 29 STC 474 (SC); AIR 1972 SC 1131 and Northern India Caterers (India) Ltd. [1978] 42 STC 386 (SC); AIR 1978 SC 1591 such laws would be ultra vires of the State Legislatures. In this connection, he has referred, to the case of Girdharilal v. Lalchand AIR 1970 Raj 145 wherein, in paragraph 14, it was observed as follows: "14. For the purposes of the case before me all that I have to decide is whether the act or omission alleged against accused Nos. 2 and 6, namely, Girdharilal Mahajan and Ramchander, is reasonably related to the discharge of their duty or omission of the discharge of their duty. I agree with the observations of the Punjab High Court that it is not a pretended or fanciful justification that should be taken into account but a connection close enough to bring the act or omission within the ambit of the official act done or purported to be done. The legislature has advisably used to expressions 'acting' or 'purporting to act', the latter expression means that even if the action may be somewhat beyond the scope of official duty, but was done under the colour of office, the protection c....
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....visions as to vesting in section 8(2), which was similarly worded as the corresponding provision of the Ordinance and therefore by a fiction of law the original vesting was to be treated as if the Act was in force when the first vesting took place. The High Court of Allahabad in Azizunnisa's case (S) AIR 1957 All 561 held the vesting to be invalid because up to the time of Ordinance 12 of 1949 and even Ordinance 20 of 1949 legislative competence was lacking, and even by the deeming provisions in sections 8(2) of Ordinance 27 of 1949 or Act 31 of 1950 there was no valid vesting, because the original vesting was bad. We think it unnecessary to decide as to whether the deeming provision of section 8(2) of the Act or of Ordinance 27 of 1949 was sufficient to give validity to the vesting. Section 8(2-A) as introduced into the Act, in our opinion, makes the vesting valid, because it gives validity to the vesting which purported to have taken place as a result of Ordinance 27 of 1949 even though it was only apparently so and was not so in law, because that is what 'purport' implies." The learned standing counsel has then referred to the Stroud's Judicial Dictionary, 4th Edition, Vol. 4....
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....he Amendment Act. It is further urged that the definitions given in article 366 of the Constitution of India are meant for construing the provisions of the Constitution of India itself and it cannot be imported for the purpose of interpreting an Act. In this connection, reference is made to a decision of a Full Bench of the Nagpur High Court in the case of Pravir Chandra Bhanj Deo Kakatiya v. State of Madhya Pradesh AIR 1953 Nag 86 (FB) wherein it was held that the definition of "Ruler" contained in clause (22) of article 366 of the Constitution could not be applied to other laws. The relevant observation contained in paragraph 9 of the judgment, is reproduced hereunder: "The next question is whether the petitioner who claims to be the Ruler is outside the definition. The term 'Ruler' is defined thus in clause (22) of article 366 of the Constitution. 'Ruler' in relation to an Indian State means the Prince, Chief or other person by whom any such covenant or agreement as is referred to in clause (1) of article 291 was entered into and who for the time being is recognised by the President as the Ruler of the State, and includes any person who for the time being is recognis....
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....t, 1948, the original definition stands and on that basis the argument of the learned counsel for the assessee must be accepted. If section 6, sub-section (1), of the Amendment Act were to be construed as applying to the U.P. Sales Tax Act, 1948, then whenever the turnover of a dealer is to be worked out for the purposes of assessment, his turnover would have to be worked out on the basis of sales which are deemed to be sales within the meaning of sub-section (1) of section 6 of the Amendment Act, and the tax would be assessed accordingly. In the end, I now take up the argument of Sri S.O.P. Agrawal that section 6 was not enacted by Parliament under its constituent powers. He argued that sections 2, 3, 4 and 5 of the Amendment Act incorporated amendments of the Constitution and have been made by Parliament under article 368 of the Constitution. He, however, submits that section 6 of the Amendment Act is not enacted by Parliament in its constituent powers. He has further argued that it is only a clause validating the laws made by the State Legislatures. He points out that under the Constitution (First Amendment) Act, 1952. Section 4 thereof added article 31A and section ....