TaxTMI 
TaxTMI 
2004 (12) TMI 651
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....m within the State of Haryana and after dehusking the same, exports rice to foreign countries. Petitioner No. 2 is a shareholder of petitioner No. 1. For the assessment year 1982-83 and onwards, the respondents levied purchase tax on the paddy purchased by petitioner No. 1. Similar imposition was made on other dealers engaged in the business of manufacture of rice out of paddy and export thereof. They challenged the levy of tax by filing petitions under article 226 of the Constitution of India. They also challenged the vires of section 15-A which was inserted by the Haryana General Sales Tax (Amendment) Act, 1993 (Haryana Act No. 9 of 1993). A Full Bench of this Court [2003] 132 STC Statutes 50. [2004] 136 STC Statutes 125. upheld the constitutionality of section 15-A and the levy of purchase tax on the paddy used for manufacturing rice which was exported out of the country-United Riceland Limited, Samana Baha, District Karnal v. State of Haryana [1997] 104 STC 362 (P&H); (1996) 3 PLR 227. The operative part of the judgment of the Full Bench which also contains the final conclusions recorded by it reads as under: "(i) That the provisions of Haryana Act No. 4 of 1991 are le....
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....levant provisions cannot be held to be declaring the law within the meaning of article 141 of the Constitution. The obiter dictum cannot be treated as precedent particularly when such obiter dictum is not found to be specifically connected with an issue before the Supreme Court. It is, however, acknowledged that obiter dictum of the Supreme Court though not a precedence yet being observations of the apex Court is worthy of respect and considerable weightage. In the light of what has been noted and discussed hereinabove, the law laid down in the aforesaid two judgments cannot be held to be a decision with respect to the matter in controversy before this Court." 5.. The petitioners and others challenged the judgment of the Full Bench by filing petitions for special leave to appeal in the Supreme Court. By an interim order dated April 8, 1996, the Supreme Court directed petitioner No. 1 to deposit 50 per cent of the tax due for the period prior to September 15, 1990 and also furnish bank guarantee for 25 per cent of the remaining tax. In compliance of that direction, petitioner No. 1 deposited a sum of Rs. 1,65,41,420 and furnished bank guarantee of Rs. 82,25,660. The appeal filed ....
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....and 9 of the Haryana Act. To recapitulate, section 6, which is a general charging section, provides that every dealer shall be liable to pay tax under the Act on the sale or purchase of, inter alia, declared goods by him in the State at the stage specified under section 17. It says that at the stage of sale or purchase of the declared goods, the tax shall be levied and paid as specified against such goods in Schedule D. It also provides that where the goods have not been subjected to tax at any of the stages of sale or purchase specified in Schedule D, the tax shall be levied and paid by a dealer liable to pay tax under the Act at the stage of the last purchase of such goods by him, after providing deductions admissible under section 27. It is not possible to read that the section by itself creates an independent charge on the declared goods. It merely indicates the stage at which the tax shall be leviable and payable. Indeed, clause (a) of sub-section (1) of section 6 itself mentions that in respect of the declared goods tax shall be levied at the stage specified in section 17. It is, therefore, futile to contend that under section 17 levy of tax on declared goods is not dependent....
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.... where the liability under section 9 was directly in question. This view was reiterated by two more Benches of this Court in Hotel Balaji case [1993] 88 STC 98; (1993) Supp 4 SCC 536 and K.B. Handicrafts Emporium [1993] 90 STC 477 (SC); (1993) Supp. 4 SCC 589. The Full Bench of the High Court, in our view, was not right in declining to act upon the ratio of the judgments in the aforementioned cases. In the result, we hold that the amendment to the definition of turnover in clause (p) of section 2 and of section 6 does not affect the position when section 9 is part of the statute." 6.. Their lordships of the Supreme Court then considered the provisions of the Punjab General Sales Tax Act, 1948 (for short, "the Punjab Act") and upheld the levy of purchase tax on paddy under section 4-B of that Act. In paragraph 39, the Supreme Court noticed the similarity in the provisions of the Punjab Act and the Haryana Act but held that similarity alone would not determine the liability of a dealer to pay purchase tax on the paddy. In paragraph 50, the Supreme Court reiterated that no purchase tax was payable on paddy under section 6 of the Sales Tax Act. For the sake of reference, para....
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....nt, which contains the conclusions recorded by the Supreme Court, is as follows (para 64 in STC): "(1) In the specified circumstances in which charge of purchase tax on the raw material is imposed, clause (b) of sub-section (1) of section 9 of the Haryana Act and the exemptions provided therein would apply; the law declared by this Court in Murli Manohar Co. [1991] 80 STC 79; (1991) 1 SCC 377, Hotel Balaji [1993] 88 STC 98; (1993 Supp 4 SCC 536) and K.B. Handicrafts [1993] 90 STC 477 (SC); (1993) Supp 4 SCC 589 holds the field; (2) while section 9 remained on the statute till April 1, 1991, retrospective amendments of sections 2(p), 6, 15 and 15-A of the Haryana Act would make no difference in regard to levy of purchase tax on paddy; (3) adjustment of purchase tax paid on paddy (raw material) is permissible under section 15-A of the Haryana Act during the relevant period; (4) by virtue of section 15-A of the Haryana Act, denial of refund of purchase tax, if any, paid by a dealer is not illegal much less unconstitutional; and (5) mere similarity between section 9(1)(b) of the Haryana Act and section 4-B of the Punjab Act would not relieve a dealer of the liability ....
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....re which is impermissible. (iv) The amendment in section 6 by Haryana Act No. 4 of 2003 is inconsequential because as per the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107; (2003) 1 SCC 561, that section did not authorise the State to levy tax on the paddy purchased by the millers and in the absence of retrospective amendment of section 9, the levy of purchase tax on paddy cannot be validated. (v) The impugned Acts are unreasonable, arbitrary and violative of article 14 of the Constitution of India because they seek to give excessive retrospectivity to the provisions of section 6 of the Haryana Sales Tax Act. (vi) The impugned Acts seek to take away the accrued and vested right of the petitioners and, therefore, the same are liable to be struck down being violative of article 14 of the Constitution. 10.. In C.W.P. No. 18485 of 2003, it has also been pleaded that the impugned amendments cannot be given effect to in the petitioners' case because order dated March 13, 2003 passed by respondent No. 3 has not been set aside or nullified by a superior adjudicating authority. 11.. In almost identical written statements fil....
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....inding effect of the decision of the Supreme Court by resorting the legislative powers which is impermissible. (iv) The State cannot validate the levy of purchase tax on paddy with retrospective effect because section 9(1)(b) under which the dealers were entitled to exemption up to March 31, 1991 has not been obliterated from the statute book with retrospective effect. (v) Section 6 is a general charging section, whereas section 9 is a special provision for levy of purchase tax on paddy and in case of the conflict, the latter would prevail. (vi) The impugned amendments are violative of article 14 of the Constitution, inasmuch as, they seek to validate levy of purchase tax under section 9 and not any other tax which can be charged under section 6. 14.. In support of his arguments, Shri Ganguly relied on the judgments of the Supreme Court in D. Cawasji and Co. v. State of Mysore [1985] 58 STC 1, S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16, Sachidananda Misra v. State of Orissa (2004) 8 SCC 599, Municipal Corporation of the City of Ahmedabad v. New Shrock Spg. and Wvg. Co. Ltd. (1970) 2 SCC 280, Gobind Sugar Mills Ltd. v. State of Bihar [1999] 115 STC 358; (1999) 7 SCC....
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....ned in section 2(p) and if the impugned amendments are read in that light, no fault can be found with the legislative steps taken by the State to protect the public revenue. In support of his arguments, Shri Chopra relied on the judgments of the Supreme Court in Polaki Motors v. State of Orissa, [1993] 88 STC 259, Krishnamurthy and Co. v. State of Madras [1973] 31 STC 190, Hira Lal Rattan Lal v. Sales Tax Officer, section III Kanpur [1973] 31 STC 178, Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab [1994] 95 STC 170, Birla Cotton Spinning and Weaving Mills Ltd. v. State of Haryana [1979] 43 STC 158, Bharat Engineering Company v. Assessing Authority, Karnal [1980] 45 STC 363; and Goodyear India Ltd. v. State of Haryana [2001] 123 STC 577. 18.. We have given serious thought to the respective arguments. Sections 6 and 9(1)(b) of the Haryana General Sales Tax Act, which were considered by the Supreme Court in the case of Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107, read as under: Section 6. Incidence of taxation.-(1) Subject to other provisions of this Act, every dealer whose gross turnover during the year immediately preceding the 27th day of May 1971, e....
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....ns 15 and 27 of this Act, every dealer whose gross turnover during the year immediately preceding the 27th day of May, 1971 exceeded the taxable quantum, shall from the 27th day of May, 1971 and every other dealer shall, on the expiry of thirty days after the date on which his gross turnover first exceeds the taxable quantum, be liable to pay tax under this on the sale or purchase of goods by him in the State at the stage hereinafter provides,- ................. Clause 3 3.. Notwithstanding anything to the contrary contained in any judgment, decree or order of any court or other authority, any levy, assessment, reassessment or collection of any amount by way of tax made or purporting to have been made in respect of purchase of paddy effected on or after 1st April, 1981 and used in the manufacture of rice sold in the course of export of goods out of the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act, 1956 (74 of 1956) and any action taken or thing done in relation to such levy, assessment, reassessment of collection shall be deemed to be as valid and effective as if such levy assessment reassessment of collection had been ....
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....ected; and (iii) no court or authority shall enforce any decree or order directing the refund of any such tax so collected." 21.. Section 4-B of the Punjab Act, on which much emphasis has been placed by Shri A.K. Chopra, reads thus: "4-B. Levy of purchase tax on certain goods.-Where a dealer who is liable to pay tax under this Act purchases any goods other than those specified in Schedule B, from any source and (i) uses them within the State in the manufacture of goods specified in Schedule B, or (ii) uses them within the State in the manufacture of any goods other than those specified in Schedule B, and sends the goods so manufactured outside the State in any manner other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or (iii) uses such goods for a purpose other than that of resale within the State or sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or (iv) sends them outside the State other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, and no ta....
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.... legislative fiat makes the new meaning binding upon courts.... The validity of a validating law, therefore, depends upon whether the Legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the Courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax." (Underlining is ours). 23.. In D. Cawasji & Co. v. State of Mysore [1985] 58 STC 1, the Supreme Court considered the constitutional validity of the Mysore Sales Tax (Amendment) Act, 1969. The facts of that case were that with effect from April 1, 1966, the State Government started collecting sales tax on the sale price of arrack and on excise duty and cesses. The appellant filed a writ petition challenging the validity of collection of sales tax on excise duty and cesses. The High Court upheld the appellant's contention and quashed the levy of sales tax on excise duty and cesses. The appeal filed by the State Government in the Supreme Court was withdrawn. Thus, the judgment of the High Court became final. Thereafter, the State Government promulgated an Ordinance to valida....
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....ment of the rate of tax was, therefore, clearly arbitrary and unreasonable. To the extent that the Act imposed the higher levy with retrospective effect and it sought to nullify the judgment and order of the High Court the Act was invalid and unconstitutional." (Emphasis supplied). 25.. In the Municipal Corporation of the City of Ahmedabad v. New Shrock Spinning and Wvg. Co. Ltd. (1970) 2 SCC 280, the Supreme Court considered the constitutional validity of section 152-A of the Bombay Principal Municipal Corporation (Gujarat Amendment and Validating Provisions) Ordinance, 1969 vide which the Municipal Corporation was authorised to refuse to refund the amount of tax illegally collected despite the orders of the Court. While striking down the impugned provision, the Supreme Court relied on the earlier judgments and held: " .......That provision attempts to make an indirect inroad into the judicial powers of the State. The Legislature under our Constitution have within the prescribed limits powers to make laws prospectively as well as retrospectively. By exercise of those powers, the Legislature can remove the basis of a decision rendered by a competent Court thereby rendering th....
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....ch cannot be regarded as those merged in Rules of Court or judgments and decrees of Courts, are sought to be nullified by the 1991 Amendment Act, it is clear that legislative power of the State Legislature is used by enacting the impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by abrogating to itself, a judicial power. Therefore, the State Legislature by enacting the 1991 Amendment Act has encroached upon the judicial power entrusted to judicial authority resulting in infringement of a basic feature of the Constitution-the Rule of Law. " 27.. In S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16, the Supreme Court considered the validity of the Karnataka State Civil Services (Regulation of Promotion, Pay and Pension) Act, 1973, by which the State Government sought to nullify the binding judicial pronouncements. While striking down section 11 of the Act, the Supreme Court observed: "It is now well-settled by a catena of decisions of this Court that a binding judicial pronouncement between the parties cannot be made ineffective with the aid of any legislative power by enacting a provision which in substance overrules such judgment....
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....Haryana [2003] 130 STC 107; (1993) Supp 4 SCC 536 and, therefore, the same are ultra vires to the legislative power of the State. A bare reading of the two amending Acts shows that by amending section 6 of the Haryana Sales Tax Act, the State Legislature has made the provisions of that section subject to sections 15 and 27, whereas unamended section 6 was subject to other provisions of the Act. Section 9(1)(b) of the Haryana Sales Tax Act, which was deleted w.e.f. April 1, 1991, has not been erased from the statute book with retrospective effect. Notwithstanding this, by virtue of clause 3 of Haryana Act No. 4 of 2003 and clause (f) of Haryana Act No. 4 of 2004, attempt has been made to validate and legalise the levy of tax on purchase of paddy on or after April 1, 1981. The use of the expression "notwithstanding anything to the contrary contained in judgment, decree or order of any Court..." in the validation clause contained in Haryana Act No. 4 of 2003 leaves no manner of doubt that the sole purpose of that clause is to nullify the effect of the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107; (1993) Supp 4 SCC 536 vide which t....
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....ed. Rates of tax, points of taxation and single point and multi-point scheme are all subject to legislative changes, additions and modifications. If the State Legislature at the time of enactment of the principal Act, viz., the Act of 1947, had provided in the charging section that certain transactions are liable to single point levy and certain other transactions are liable for multi-point levy and yet other transactions are exempted and if some dealers or class of dealers or the purchases or a class of purchasers are exempt and others not exempt no exception to such levy could have been taken. It will not make any different if the same thing is done under two different enactments or more than one enactment. It is not correct to state that because the Principal Act contemplated a single point levy it is not open to the State Legislature to adopt a multi-point levy at a different stage or take certain specific transactions or gross turnover for multi-point taxation. It is also not necessary that the dealer should be enabled to pass on the incidence of the tax on sale to the purchaser in order that it might be a tax on sales of goods. There being no legal or constitutional bar fo....
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....ection 3-D(1) did not violate article 14 of the Constitution of India; (v) that the retrospective levy was not violative of article 19(1)(f) or (g); the amendment was necessitated because of the Legislature's failure to bring out clearly in the principal Act its intention to separate processed or split foodgrains from unprocessed or unsplit foodgrains and the retrospective amendment became necessary as otherwise the State would have had to refund large sums of money; (vi) that the fact that the retrospective levy did not afford an opportunity to the dealers to pass on the tax to the consumers had no relevance in considering the legislative competence of the levy; (vii) that Explanation II clearly brought to tax with retrospective effect split or processed foodgrains as well; (viii) that no fresh notification was necessary to tax split or processed foodgrains; because of Explanation II, the expression 'foodgrains' in the notification already issued had to be read as containing two different items, processed or split foodgrains and unprocessed or unsplit foodgrains; (ix) that section 3-D had not made an excessive delegation of legislative function to the ex....