TaxTMI 
TaxTMI 
TaxTMI 
1988 (10) TMI 41
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....the First Schedule to the Central Excises and Salt Act, 1944; and 7. Cotton fabrics, silk fabrics, woollen fabrics and rayon or artificial silk fabrics as defined in Item Nos. 19, 20, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944." The question before us is whether, in respect of the assessment years 1971-72 and 1972-73, with which we are concerned, the exemption given to 'cotton fabrics' under Item 7 above should be restricted to 'cotton fabrics' as defined in the Central Excises and Salt Act.1944 (the 1944 Act') as it stood on 1-4-1963 or whether it would also cover goods falling under the said definition after Its amendment in 1969. 2. Though we are concerned only with the Interpretation of the Kerala General Sales Tax Act, 1963, it is necessary to refer back to the earlier history of some Central as well as State legislations: (i) We start with the 1944 Act. By this Act, excise duty was levied on the manufacture or production of various types of goods enumerated in the First Schedule to the Act. Item 19 (originally Item 12) of the First Schedule, as it stood on 1-4-1963, defined 'cotton fabrics' thus: "Cotton fabrics - 'Cotton Fabr....
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....n Item No. 21 of the First Schedule to the Central Excises and Salt Act, 1944; (xi) silk fabrics as defined in Item No. 20 of the First Schedule to the Central Excises and Salt Act, 1944." The definitions of the above goods were thus related to their definitions under the 1944 Act. S. 15 of the Act imposed certain restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. It may be mentioned that This section, as originally enacted in 1956, had been amended w.e.f. 6-6-1957, by Act 16 of 1957 and, again, by Act 31 of 1956, w.e.f. 1-10-1958. (iii) About the same time as the C.S.T. Act, Parliament also enacted the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ('the 1957 Act'). The statement of objects and reasons of this Act reads as follows: "The object of this legislation is to impose additional duties of excise in replacement of the sales tax levied by the Union and the States on sugar, tobacco and mill-made textiles and to distribute the net proceeds of these taxes, except the proceeds attributable to Union Territories, to the States. The distribution of the proceeds of the additional duties broadly followed the pat....
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....mendment) Act VII of 1958 with retrospective effect from the same date. This amendment Act inserted S. 5A in the 1125 Act which exempted certain goods from the levy of sales tax. Sub-section (1) of this section read thus: "5A. Exemption of the tax on the sale of mill-made textiles (other than pure silk), tobacco and sugar :- (1) The sale by any dealer of - (i) mill-made textile, other than pure silk, (ii) tobacco, and (iii) sugar; other than stock of such goods in his possession, custody or control immediately before the 14th day of December, 1957, shall, as from that date, be exempt from taxation under Section 3, sub-section (1)." This Act was replaced by the Kerala General Sales Tax Act, 1963 ('the 1963 Act'), as already mentioned w.e.f. 1-4-1963. (v) We have already referred to Section 9 and Item 7 of the Third Schedule to the 1963 Act. The Kerala General Sales Tax (Second Amendment) Act, (Act 16 of 1967) amended Item 7 of 1963 Act to read as follows w.e.f. 1 -9-1967: "7. Cotton fabrics, woollen fabrics, and rayon or artificial silk fabrics as defined in Item Nos. 19, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944." In other word....
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.... S.C.R. 1). It is unnecessary to make a detailed reference to these decisions. It is ufficient to say that they draw a distinction between referential legislation which merely contains a 'reference to, or citation of', a provision of another statute and a piece of referential legislation which incorporates within itself a provision of another statute. In the former case, the provision of the second statute, along with all its amendments and variations from time to time, should be read into the first statute. In the latter case, the position will be as outlined in Narasimhan (1976-1 S.C.R. 6) where, after referring to Secretary of State v. Hindustan Cooperative Insurance Society Ltd. (1931-581.A. 259), this Court summed up the position thus : "On a consideration of these authorities, therefore, it seems that the following proposition emerges: Where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act. This principle, however, will not apply in the following cases : (a) where the subsequent Act and the previous A....
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....ird Schedule the definition of the 1944 Act as it stood at the time of its enactment and that this incorporation is unaffected by subsequent changes in the 1944 Act. He contested the correctness of the High Court's observations that the concept of 'cotton fabrics' in the 1944 and 1963 Acts were integrally linked and that, unless the extended definitions of the former were imported into the latter, the latter Act would become unworkable and ineffectual. According to him, the provisions of the CST Act and the 1957 Act have been unnecessarily brought into the discussion in order to forge a connection between the various enactments and in an attempt to lend strength to an argument that the exemption of an item of goods from the levy of sales tax by the State was correlated to the existence of a levy of additional excise duty in respect of those very goods under the 1957 Act. He submits that this argument is not tenable and that there is no connection between the 1944 Act, the CST Act, the 1957 Act and the 1963 Act. His submissions are these : (a) When the Kerala Act of 1125 - M.E. was amended by Act VII of 1958 w.e.f. 14-12-1957, the Kerala State Legislature was fully alive to the pro....
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.... a restrictive interpretation on the 1963 Act, even assuming for purposes of argument that it may be capable of a wider interpretation. 5. There is some force in these contentions, but, after hearing both counsel, we are of opinion that the conclusion of the High Court should be upheld. In the first place, we think it would be correct to say that the 1963 Act brings in the definitions of the 1944 Act by way of reference or citation and not by way of incorporation. For, a reading the Act shows that the Act intended to confer exemption on a number of goods set out in the Schedule. Of these, sine(r) Items 5 to 7 are defined in the 1944 Act, the Act refers to those definitions to ascertain the scope of these items. There are no express words used by the statute which will justify an inference that the intention was to incorporate those definitions, as standing on that date, into the 1963 Act. That apart, as pointed out by the High Court, the question whether it is an instance of reference or citation as contrasted with incorporation pales into significance if all the Central and State enactments referred to at the outset are really part of an integrated scheme evolved to achieve a par....
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....t levy of sales tax on declared goods should not be at a rate exceeding 2% or be levied at more than one point in a State. Before this section came into force, it was amended by Act 16 of 1957 which retained the first restriction and, so far as the second is concerned, provided that the tax should be levied only on the last sale or purchase inside the State and even that should not be levied when that last sale or purchase is in the course of inter-state trade or commerce as defined. Act 31 of 1958 amended S. 15 to impose certain modified restrictions and conditions with the details of which we are not here concerned. These restrictions clearly entailed loss of revenue to the States and it was considered expedient and desirable to compenstate the States for the proportionate loss of sales tax incurred by them. Thus, even before S. 15 was brought into force, the Central Government decided to pass an Act to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds thereof among the States in pursuance of the principles of distribution recommended by the Second Finance Commission in its report dated 30-9-....
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....f the two legislations (the 1963 Act and the 1957 Act) to which attention has been invited already, that it was not the policy of the Kerala State legislature to exempt from sales tax goods which suffered additional excise duty. The sales tax exemption to conferred on a totally independent basis. It is not linked to the fluctuations in, or variation of, the treatment under the CST Act and the 1957 Act. The description of Items 5, 7 and 8, by simply incorporating the definitions then readily available in the 1944 Act (not the CST Act or the 1957 Act), was not intended to bring about the result that these definitions should be read in the light of the change that they may undergo for the purposes of the 1944 Act. 8. Sri Potti is certainly correct in saying that the wordings of the Acts do not show an exact correlation between the liability to pay additional excise duty and the exemption from the levy of sales tax under the 1963 Act. But it would not be correct to say that the provisions of the latter can be interpreted without reference to the other two legislations. The CST Act has a definite impact on the manner and extent of sales tax levy, in so far as declared goods are concern....
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....de contents of a legislation by allowing it a latitude in fixing a date for its commencement. It cannot be understood as an authority for the proposition that a State legislature can adopt only the existing provisions of a statute passed by another legislature but not its future amendments and modifications, in the first place, such a proposition will strike at the very root of the concept of referential legislation as explained in the decisions referred to above and the distinction drawn by them between cases of mere reference or citation on the one hand and of incorporation, on the other. Secondly, In Shama Rao only three of the five Judges expressed an opinion about this aspect of the case. Their view point was presented by Shelat J. in the following words: The question then is whether in extending the Madras Act in the manner and to the extent it did under Sec. (2) (1) of the Principal Act the Pondicherry legislature abdicated its legislative power in favour of the Madras legislature. It is manifest that the Assembly refused to perform its legislative functions entrusted under the Act constituting it. It may be that a mere refusal may not amount to abdication if the legislatur....
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....d prescribed the rate of sales tax. The central sales tax in respect of the territory of a State is ultimately assigned to that State under Article 269 of the Constitution and is imposed for the benefit of that State. We would, therefore, hold that the appellants cannot derive much assistance from the above mentioned decision of this Court. Methew J. observed: "We think that the principle of the ruling in Shama Rao v. Pondicherry (supra) must be confined to the facts of the case. It is doubtful whether there is any general principle which precludes either Parliament or a State legislature from adopting a law and the future amendments to the law passed respectively by a State legislature or Parliament and incorporating them in its legislation. At any rate, there can be no such prohibition when the adoption is not of the entire corpus of law on a subject but only of a provision and its future amendments and that for a special reason or purpose." 10. We have attempted to show that the 1963 Act, on a proper construction, does indicate a policy that certain items which are subject to additional excise duty should be left out of sales tax levy except in cases where there is a specific....