Goodyear India Ltd. Vs. State of Haryana & Anr [1989] INSC 311 (19 October 1989)
Mukharji, Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
CITATION: 1990 AIR 781 1989 SCR Supl. (1) 510 1990 SCC (2) 71 JT 1989 (4) 229 1989 SCALE (2)982
ACT:
Haryana General Sales Tax Act, 1973: Section 9 (Prior to its amendment by Act No. 11 of 1979)--Purchase Tax--Provision for levy of purchase tax on 'Disposal' of manufactured goods--Notification--(No. S.O 119/H.A. 20/73/Ss. 9 & 15/74 dated July 19, 1974)--Levy of tax on mere despatch of goods to the dealers themselves outside the State--Validity of.
Section 9(1)(b) (As amended by Haryana General Sales Tax (Amendment and Validation Act, 1983--Purchase Tax--Taxing of purchase of raw material if goods manufactured therefrom despatched outside the State otherwise than by way of sale in the course of inter State trade--Whether taxing of consignments in the course of inter State trade--Whether beyond the legislative competence of State Legislature--Effect of Constitution (Forty-Sixth) Amendment Act, 1982.
Section 9(1)(c)--Purchase tax on Exports--Food Corporation of India--Purchase of foodgrains from farmers within the State--Despatch of food grains to its Branches outside the State--Levy of Tax at the Point Of Despatch--Validity of.
Section 24(3)--Validity of:
Haryana General Sales Tax (Amendment and Validation) Act, 1983--Law declared ultra rites State Legislature--Validating Act--No change made in substantive law mere direction to ignore judgment--Whether void.
Section 50--Penalty--Charging provision held ultra vires-Penalty proceedings based on charging provision whether invalid.
Bombay Sales Tax Act 1959: Section 13-AA (As inserted by Maharashtra Act XXVIII of 1982)--Scope, effect and validity of. Purchase tax--Raw material purchased by paying tax used in the manufacture of goods--Manufactured goods despatched to Agents in other States--Levy of Additional Tax--Whether tax on the consignment of manufactured goods outside the State--Whether beyond the legislat511 tive competence of State Legislature--Whether violative of Articles 14 and 301 of the Constitution of India.
Constitution of India, 1950: Article 14--Section 13-AA of the Bombay Sales Tax Act, 1959 (As inserted by Maharashtra Act XXVIII of 1982)--Vires of.
Articles 245 and 246--Doctrine of Pith and Substance--What is-Test for determination--Legislative competence--Relevancy of pith and substance rule.
Article 269(1)(h)--Constitution (Forty-Sixth) Amendment Act, 1982--Object and effect of.
Article 301--Freedom of Trade Commerce and Intercourse Bombay Sales Tax Act, 1959 Section 13-AA (As inserted by Maharashtra Act XXVIII of 1982)--Vires of--Imposition of Additional purchase tax--Permissibility of.
Schedule VII--Entries in the Legislative Lists--Only demarcate legislative field--Do not confer legislative powers.
Statutory Interpretation: Rules of interpretation of statutes-applicability of to interpretation of Constitution--Constitution--Not to be interpreted in a narrow pedantic sense.
Fiscal statutes--Tax liability--Whether can be determined by reference to interpretation of a statute other than the statute creating liability--Should be construed strictly--Assumptions and presumption in interpretation of fiscal law--Whether permissible.
Determination of nature of a tax--Standard or measure on which the tax is levied--Whether relevant and conclusive--Courts whether to look into Pith and Substance Rule.
Taxable event--Charging event--What is--Test for determination--What is--Stages of taxation explained.
Excise duty--Sales Tax--Distinction between--Tax on sale of goods--Tax on use or consumption of goods--Distinction between--Reasonable construction should be followed and literal construction to be avoided if that defeats the manifest object and purpose of the Act.
512 Mischief Rule: Provisions of Constitutional changes--To be construed in the context of Mischief Rule.
Practice and Procedure: Precedent--What is--A decision on a question which has not been argued--Whether can be treated as precedent.
Words and Phrases: 'Disposal'--Meaning of.
HEAD NOTE:
The appellant/petitioner company--Good Year India Limited--a registered dealer both under the Haryana General Sales Tax Act, 1973 and Central Sales Tax Act, 1956, was manufacturing automobile tyres and tubes at Ballabgarh in the State of Haryana. For the said manufacturing activity it was purchasing various kinds of raw materials both within the State and from outside the State of Haryana. The Company was despatching these manufactured goods viz. tyres and tubes to its own branches and sales depots outside the State of Haryana.
The assessing authority imposed upon the appellant company the purchase tax under section 9 of the Haryana General Sales Tax Act, 1973 in view of the despatches made by it of the manufactured goods to its various depots outside-the-State.
The petitioner company filed writ petition in the Punjab and Haryana High Court challenging the validity of the Notification levying the tax. A Division Bench of the High Court allowed the petition holding that disposal of goods being separate and 'distinct from despatch thereof, a mere despatch of goods out Of the State by a dealer to his own branch while retaining both 'the title-and possession thereof does not come within the ambit of the phrase "disposes of the manufactured goods in any manner otherwise than by way of sale", as employed in Section 9(i)(a)(ii) of the Act.
Accordingly the High Court set aside the assessment orders and quashed the impugned Notification as ultra vires of section 9 on the ground that whereas Section 9 provided only for the levy of purchase tax On the disposal of the manufactured goods, the impugned Notification makes mere despatch of goods to the dealer themselves taxable. To override the effect of the said judgment the Haryana Legislature enacted Haryana General Sales Tax (Amendment and Validation) Act 1983 where by Section 9 of the Act was amended with retrospective effect to include within its sweep the despatch of manufactured goods to a place outside the State in any manner otherwise than by way of sale. The impugned Notification and the con513 sequential action taken thereunder were also validated.
The petitioner company filed writ petitions challenging the assessments. The High Court allowed the petitions holding section 9(1)(b) of the Haryana General Sales Tax Act 1973 as amended by the Haryana General Sales Tax (Amendment and Validation) Act, 1983 in so far as it levied a purchase tax on the consignment of goods outside the State in the course of inter-State trade or commerce was beyond the legislative competence of the State of Haryana and was void and inoperative because it intruded and trespassed into an arena exclusively meant for taxation by the Union of India under Entry 92-B of List I of the Seventh Schedule. Accordingly the High Court set aside the amended provisions of section 9 as also the retrospective validation of the Notification and the consequential validation of all actions taken thereunder. Against this decision of the High Court, State of Haryana preferred Special Leave Petitions in this Court.
During the pendency of these Special Leave Petitions, the assessing authority issued Show-cause notices asking the petitioner company to show-cause why in addition to the purchase tax, it should not be liable to penalty as well.
The Petitioner company again filed writ petitions in the Punjab & Haryana High Court challenging the validity of these notices. In the meantime a Full Bench of the High Court decided the question again and overruling the decision of the earlier Division Bench held that the taxing event was the act of purchase and not the act of despatch of the consignment. The Full Bench of the High Court held that section 9(1)(b) as amended was neither invalid nor ultra vires. Against the aforesaid judgment of the Full Bench the Petitioner Company filed appeals in this Court. All these questions are the subject matters of these appeals.
In the connected appeals, the Food Corporation of India was procuring food-grains from the farmers through commission agents in tile mandis of Haryana and despatching them to its own branches in the deficit State of the country. The Corporation branches in the recipient States were supplying these stocks to the State agencies/Fair Price Shops and were also paying tax as per the provisions of the Sales Tax law of the respective States. Some of the stocks were distributed within the State of Haryana for the public distribution system for which sales tax was charged. and deposited with the sales-tax depots as per the Haryana General Sales Tax Act, 1973. In respect of the inter-State despatch of wheat and other food-grains by the Food Corporation of India to its own branches tax was attracted at the time of despatch 514 under section 9(1)(c) of the Haryana Act. The Food Corporation of India impugned the levy of tax.
In the other connected appeals the appellant companies--Hindustan Lever Ltd. and Wipro Products--were manufacturing vanaspati, soaps, chemicals and agro chemicals. For the said manufacturing activities, they were purchasing non-essential vegetable oil (VNE oil) and other raw materials and were paying purchase tax @4% under section 3 of the Bombay Sales Tax Act, 1959. The VNE oil was subsequently used by the appellant companies in the manufacture of vanaspati and soaps. The finished products manufactured by the appellant companies viz. vanaspati and soaps used to be despatched outside the State of Maharashtra to their clearing and forwarding agents. The assessing authority levied additional purchase tax @ 2% under section 13-AA of the Act on the purchase of said goods---VNE oil.
The appellant companies filed writ petitions in the High Court challenging the orders of the assessing authority levying the additional tax of 2% and also the vires of section 13-AA of the Bombay Sales Tax Act, 1959 under which the additional tax was levied, contending that the additional tax of 2% levied on raw materials, where the finished goods manufactured therefrom were despatched outside the State was in the nature of consignment tax which was not within the legislative competence of the State Legislature.
The High Court dismissed the petitions holding (i) the additional purchase tax levied under section 13-AA of the Act was on the purchase value of VNE oil used in the manufacturing of goods transferred outside the State and not on the value of the manufactured goods so transferred; (ii) the State Legislature was competent to levy the tax under Entry 54 of the State List in the Seventh Schedule to the Constitution, and (iii) Section 13-AA was not violative of either Article 14 or Article 301 of the Constitution of India.
Against the decision of the High Court appellant companies filed appeal in this Court.
Disposing of the matters, this Court,
HELD: (Per Mukharji, J.)
1. Analysing section 9 of the Haryana General Sales Tax Act, 515 1973 it is clear that the two conditions specified, before the event of despatch outside the State as mentioned in section 9(1)(b), namely, (i) purchase of goods in the State and (ii) using them for the manufacture of any other goods in the State, are only descriptive of the goods liable to tax under Section 9(1)(b) in the event of despatch outside the State. If the goods do not answer both the descriptions cumulatively, even though these are despatched outside the State of Haryana, the purchase of those goods would not be put to tax under Section 9(1)(b). The liability to pay tax under section 9(1)(b) does not accrue on purchasing the goods simpliciter, but only when these are despatched or consigned out of the State of Haryana. The section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods, losing its original identity, and thereafter when the manufactured goods are despatched outside the State' of Haryana and only then tax is levied and liability to pay tax is created. It is the cumulative effect of that event which occasions or causes the tax to be imposed. [539F-H; 540A-B]
1.1 A taxable event is that which is closely related to imposition. In the instant section viz. section 9(1)(b) there is such close relationship only with despatch. The goods purchased are used in manufacture of new independent commodity and thereafter the said manufactured goods are despatched outside the State of Haryana. In this series of transactions the original transaction is completely eclipsed or cease to exist when the levy is imposed at the third stage of despatch of manufacture. The levy has no direct connection with the transaction of purchase of raw-materials, it has only a remote connection of lineage. The mere consignment of goods by a manufacturer to his own branches outside the State does not in any way amount to a sale or disposal of the goods as such. The consignment or despatch of goods is neither a sale nor a purchase. The tax imposed under Section 9(1)(b) is a tax on despatch. The tax on despatch of goods outside the territory of the State certainly is in the course of inter-State trade or commerce and amounts to imposition of consignment tax, and hence the latter part of section 9(1)(b) is ultra vires and void.
[540G-H; 542H; 543A; 544E; 545A] Tata Iron & Steel Co. v. State of Bihar, [1958] SCR 1355, referred to.
Good Year India Ltd. v. State of Haryana, 53 STC 163 and Bata India Ltd. v. State of Haryana & Anr., 54 STC 226, approved.
516 Des Raj Pushap Kumar Gulati v. The State of Punjab, 58 STC 393, overruled.
Yusuf Shabeer & Ors. v. State of Kerala & Ors., 32 STC 359; Coffee Board v. Commissioner of Commercial Taxes & Ors., 60 STC 142 and Coffee Board, Karnataka v. Commissioner of Commercial Taxes, Karnataka, 70 STC 162, distinguished.
State of Tamil Nadu v. M.K. Kandaswami, 36 STC 191;
Ganesh Prasad Dixit v. Commissioner of Sales Tax, M.P., [1969] 24 STC 343 and Malabar Fruit & Company v. Sales Tax Officer, Pallai, 30 STC 537, distinguished.
1.2 The effect of the Constitution (Forty-sixth Amendment) Act, 1982 is that the field of taxation on the consignment/despatch of goods in the course of inter-State trade or commerce expressly comes within the purview of the legislative competence of the Parliament. [543H]
2. If section 9(1)(b) is ultra vires, the penalty proceedings would automatically go as they are in substance, based on the violation of section 9(1)(b) of the Act and the consequent proceedings flowing therefrom. [545B]
3. Section 24(3) of the Haryana General Sales Tax Act, 1973 without making any change in the substantive provision purports to give a direction to ignore the judgments in Goodyear and Bata India Ltd. cases. This provision is void.
[546B] Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, [1969] 2 SCC 283 and Dy. Commissioner of Sales Tax (Law) Board of Revenue (Taxes) v. M/s Thomas Stephen & Co. Ltd. Quilon, [1988] 2 SCC 264, followed.
4. In respect of inter-State despatch of wheat and other food grains by Food Corporation of India to its own branches, tax is attracted at the time of despatch under Section 9(1)(c) of the Haryana Act. Section 9 is the charging section for taxation in case where the goods are purchased for export. There is no other provision for levy of purchase or sales tax in such cases of export. [547B]
4.1 No tax is payable under the Haryana Act when exports outside the State take place either in the course of inter State sale or export out of the territory of India. But the tax is payable for sale in the course 517 of inter-State trade and commerce i.e. under the Central Sales Tax Act. It is only when the goods are despatched/consigned to the depots of the FCI in other States that tax is levied under section 9 of the Haryana Act. This is in addition to the sales tax paid by the FCI on the sale of grains in the recipient States. In view of sections 14 & 15 of the Central Sales Tax Act, it becomes clear that wheat is one of the commodities specified as 'declared goods' and in respect of which the intention is clear that the tax is payable only once on the declared goods. In the case of inter-State sale if any tax has been paid earlier on declared goods inside the State the same is to be refunded to the dealer who is paying tax on such inter-State Sales. On these transactions no tax is liable in the recipient State, while in case of inter-State despatches, the tax is leviable twice. Section 9(1)(c), which insofar as it purports to tax, exports, is beyond the legislative competence of the State of Haryana. [547E-G]
5. The incidence of the levy of additional tax of two paise in the rupee under Section 13-AA of the Bombay Sales Tax Act, 1959 is not on the purchase of goods, but such a levy is attracted only when--(a) the goods which so purchased on payment of purchase tax are used in the manufacture of taxable goods; and (b) the goods so manufactured are despatched to his own place of business or to his agent's place of business outside the State. Therefore, the incidence of tax is attracted not merely on the purchase but only when the goods so purchased are used in the manufacture of taxable goods and are despatched outside the State. The incidence of additional tax has no nexus with the purchase of the raw-materials. [553A-B; D]
5.1 Purchase tax under section 3 of the Act is attracted when the taxable event i.e. the purchase of goods occurs but the taxable event for the imposition of additional tax of two paise in the rupee occurs only when the goods so purchased are used in the manufacture of taxable goods and such taxable goods are despatched outside the State by a dealer manufacturer. The goods which are despatched are different products from the goods on the purchase of which purchase tax was paid. It is therefore not possible to accept the argument that the chargeable event was lying dormant and is activated only on the occurrence of the event of despatch. [553E; 556F; 557C]
5.2 The charging event is the event the occurrence of which immediately attracts the charge. Taxable event cannot be postponed to the occurrence of the subsequent condition.
In that event, it would be the subsequent condition the occurrence of which would attract the Charge which will be taxable event. Therefore the charge under 518 section 13-AA is a duty on despatch. Accordingly this charge can not be sustained.[557D] The Bill to amend s. 20 of the Sea Customs Act, 1878 and S. 3 of the Central Excises & Salt Act, [1944], (1964) 3 SCR 787; M/s Guruswamy & Co. v. State of Mysore, [1967] 1 SCR 548; Mukunda Murari Chakravarti & Ors. v. Pabitramoy Ghosh & Ors., AIR 1945 FC 1; Kedar Nath Jute Mfg. Co. Ltd. v. C.I.T., 82 ITR SC 363; State of M.P. v. Shyam Charan Shukla, 29 STC SC 215; R.C. Jail v. Union of India, [1962] Suppl. 3 SCR 436; Union of India v. Bombay Tyre International Ltd., [1984] 1 SCR 347 and State of Karnataka v. Shri Ranganatha Reddy, [1978] 1 SCR 641, referred to.
Wipro Products v. State of Maharashtra, [1989] 72 STC 69 Bom., Reversed.
5.3 Imposition of a duty or tax in every case would not tantamount per se to any infringement of Article 301 of the Constitution. Only such restrictions or impediments which directly or immediately impede free flow of trade, commerce and intercourse fail within the prohibition imposed by Article 301. A tax in certain cases may directly and immediately restrict or hamper the flow of trade. but every imposition of tax does not do so. Every case must be judged on its own facts and its own setting of time and circumstances.
Unless the court first comes to the finding on the available material whether or not there is an infringement of the guarantee under Article 301 the further question as to whether the Statute is saved under Article 304(b) does not arise. [558B-C]
5.4 In the instant case. the goods taxed do not leave the State in the shape of raw material, which change their form in the State itself and there is no question of any direct, immediate or substantial hindrance to a free flow of trade. Therefore Section 13-AA of the Bombay Sales Tax Act 1959 is not violative of Article 301. [558D-E] Atiabari Tea Co. Ltd. v. The State of Assam & Ors., [1961] 1 SCR 809; The Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan, [1963] 1 SCR 491; Andhra Sugars Ltd. v. State of Andhra Pradesh, [1968] 1 SCR 705; State of Madras v. N.K. Nataraja Mudaliar, [1968] 3 SCR 829 and State of Kerala v. A.B. Abdul Khadir & Ors., [1970] 1 SCR 700, referred to.
Kalyani Stores v. The State of Orissa & Ors., [1966] 1 S.C.R. 865, relied on.
519
6. The provisions of constitutional changes have to be construed not in a narrow isolationism but on a much wider spectrum and the principles laid down in Heydon's case are instructive. [529H; 530A] Black Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg, [1975] 1 All E.R. 810, referred.
Heydon's case, (1584) 3 Co. Rep. 7a, relied on.
7. In construing the expressions of the Constitution to judge whether the provisions of a statute are within the competence of the State Legislature, one must bear in mind that the Constitution is to be construed not in a narrow or pedantic sense. The Constitution is not to be construed as mere law but as the machinery by which laws are to be made. [533F] James v. Commonwealth of Australia, [1936] A.C. 578; The Attorney General for the State of New South Wales v. The Brewery Employees Union etc., [1908] 6 C.L.R. 469; Re. Central Provinces & Berar Sales of Motor Spirit and Lubricants Taxation Act 1938, A.I.R. 1939 F.C.I. and The Province of Madras v. M/s Boddu Paidanna & Sons, A.I.R. 1942 F.C. 33, referred to.
8. The nomenclature of the Act is not conclusive and for determining the true character and nature of a particular tax, with reference to the legislative competence of a particular Legislature, the Court will look into its pith and substance. [543H; 544A] Governor General in Council v. Province of Madras, [1945] 72 I.A. 91 and Ralla Ram v. The Province of East Punjab, A.I.R. 1949 F.C. 81, referred to.
9. The doctrine of pith and substance means that if an enactment substantially falls within the power expressly conferred by the Constitution upon the Legislature which enacted it, it cannot be held to be invalid merely because it incidentally encroaches upon matters assigned to another legislature. [555H; 556A] Kerala State Electricity Board v. Indian Aluminium Co., [1976] 1 S.C.R. 552 and Prafulla Kumar Mukherjee & Ors. v. Bank of Commerce, A.I.R. 1947 PC 60, referred to.
9.1 The true test to find out what is pith and substance of the 520 legislation is to ascertain the true intent of the Act which will determine the validity of the Act. [577B]
10. There are three stages in the imposition of tax.
There is the declaration of liability, that is the part of the Statute which determines what persons in respect of what property are liable. Next, there is the assessmentLiability does not depend on assessment, that exhypothesi has already been fixed. But assessment particularises the exact sum which a person is liable to pay. Lastly comes the method of recovery if the person taxed does not voluntarily pay.
[539B-C] Whitney v. Commissioner of Inland Revenue, [1926] A.C. 37 and Chatturam & Ors. v. C.I.T., Bihar, 15 I.T.R. F.C. 302, referred to.
11. While determining nature of a tax, though the standard or the measure on which the tax is levied may be a relevant consideration, it is not the conclusive consideration. [556C] Governor General in Council v. Province of Madras, [1945] 72 I.A. 91; R.R. Engineering Co. v. Zila Parishad Bareilly & Anr., [1980] 3 S.C.R. 1; In Re A reference under the Government of Ireland Act, 1920, [1936] A.C. 352 and Navnitlal C. Javeri v. K.K. Sen, Appellate Asstt. Commissioner of Income Tax 'D' Range Bombay, [1965] 1 S.C.R. 909, referred to.
12. The liability to tax would be determined with reference to the interpretation of the Statute which creates it. It cannot be determined by referring to another Statute. [555G]
13. In fiscal legislations normally a charge is created. The. mischief of taxation occurs on the happening of the taxable event. Different taxes have different taxable events. A taxing event is that event the occurrence of which immediately attracts the levy or the charge of tax. What is the taxable event or what necessitates taxation in an appropriate Statute must be found by construing the provisions.
The main test for determining the taxable event is that on the happening of which the charge is affixed. [552H; 553A: 552G: 533E; 539B]
14. Fiscal laws must be strictly construed. n is not permissible to make assumptions and presumptions in a fiscal provision. [536H; 538G] C.S.T., U.P. v. The Modi Sugar Mills Ltd., [1961] 2 S.C.R. 189 and Baidyanath Ayurved Bhawan (P) Ltd., Jhansi, v. Excise Commis521 sioner, U.P. & Ors., [1971] 2 S.C.R. 590, referred to.
15. While interpreting a Statute a reasonable construction should be followed and literal construction may be avoided if that defeats the manifest object and purpose of the Act. [555F] Commissioner of Wealth-tax, Bihar & Orissa v. Kripashankar Dayashankar Worah, 81 I.T.R. 763 and Income Tax Commissioners for City of London v. Gibbs, 10 I.T.R. (Suppl.) 121 H.L., referred to.
16. The Entries in the Constitution only demarcate and legislative fields of the respective legislatures and do not confer legislative powers as such. [544H; 545A]
17. A precedent is an authority only for what it actually decides and not for what may remotely or even logically follows from it. [537E] Quinn v. Leathem, [1901] A.C. 495 and The State of Orissa v. Sudhansu Sekhar Misra & Ors., [1968] 2 S.C.R. 154, followed.
17.1 A decision on a question which has not been argued cannot be treated as a precedent. [542B] Rajput Ruda Maha & Ors. v. State of Gujarat, [1980] 2 S.C.R. 353, followed.
(Per Ranganathan, J.) (Concurring)
1. Section 9 of the Haryana General Sales Tax Act, 1973 as well as section 13-AA of the Bombay Sales Tax Act, 1959 purport only to levy a purchase tax. The tax, however, becomes exigible not on the occasion or event of purchase but only later. It materialises only if the purchaser (a) utilises the goods purchased in the manufacture of taxable goods, and (b) despatches the goods so manufactured (otherwise then by way of sale) to a place of business situated outside the State. The legislation, however, is careful to impose the tax only on the price at which the raw materials are purchased and not on the value of the manufactured goods consigned outside the State. [559G-H; 560A]
2. It is one thing to levy a purchase tax where the character and class of goods in respect of which the tax is levied is described in a particular manner and a case like the present where the tax, though described as purchase tax, actually becomes effective with reference to 522 a totally different class of goods and, that too, only on the happening of an event which is unrelated to the act of purchase. [560D-E]
2.1 The "taxable event", if one might use the expression often used in this context, is the consignment of the manufactured goods and not the purchase. [560E]
2.2 The background of the Constitutional (Forty-sixth Amendment) indicates that there were efforts at sales tax avoidance by sending goods manufactured in a State out of raw materials purchased inside to other States by way of consignments rather than by way of sales attracting tax.
This situation lends force to the view that the State, unable to tax the exodus directly, attempted to do so indirectly by linking the levy ostensibly to the "purchases" in the State. [560G-H] Andhra Sugar Ltd. & Anr. v. State, [1968] 1 SCR 705, referred to.
State of Tamil Nadu v. Kandaswami, [1975] 36 S.T.C. 191, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1166-72 of 1985 etc. etc.
From the Judgment and Order dated 24.1.85 of the Punjab & Haryana High Court in C.W.P. Nos. 698 to 703 and 733 of 1984.
Raja Ram Aggarwal, B. Sen, Dr. Devi Paul, D.S. Tawatia, Soli J. Sorabjee, Kapil Sibal and S.K. Dholakia, A.N. Hakasar, D.N. Misra, Mukul Mudgal, Ravinder Narain, P.K. Ram, S.
Sukumaran, S. Ganesh, Mahabir Singh, H.S. Anand. R. Karaniawala, Mrs. Manik Karanjawala, A.S. Bhasme and A.M. Khanwilkar for the Appearing Parties.
The following Judgments of the Court were delivered:
SABYASACHI MUKHARJI, J. Except civil appeals Nos. 416263 of 1988, in these appeals along with the special leave petitions and the writ petition, we are concerned with Sections 9(1) and 24(3) as well as the penalty proceedings initiated under Section 50 of the Haryana General Sales Tax Act, 1974 (hereinafter referred to as 'the Act'). So far as civil appeals Nos. 4 162-63 of 1988 are concerned, these involve the scope, effect and validity of Section 13AA of the Bombay Sales 523 Tax Act. 1959 (hereinafter referred to as 'the Bombay Act') as introduced by the Maharashtra Act No. XXVIII of 1982. It will, therefore, be desirable first to deal with the question of the Act, and then with the provisions of the Bombay Act as mentioned hereinbefore.
The appellant/petitioner--Goodyear India Ltd., was engaged at all relevant times, inter alia, in the manufacture and sale of automobile tyres and tubes. It manufactured the said tyres and tubes at its factory at Ballabhgarh in the district of Faridabad in the State of Haryana. For the said manufacturing activity the appellant had, from time to time, to purchase various kinds of raw-materials both within the State and outside the State. It is stated that about 7 to 10% of the total needs of raw-materials on an all India basis were locally procured by the appellant from Haryana itself. The raw-materials purchased in Haryana were:
(i) pigments (partly),
(ii) chemicals (partly),
(iii) wires (partly),
(iv) carbon black (partly),
(v) rubber (partly), and
(vi) fabric (partly).
The rest of the requirements were imported from other States. The appellant had its depots at different places in the State of Haryana as well as in other States. After manufacturing the said tyres and tubes, about 10 to 12% of the total manufactured products used to be sold in the State of Haryana either locally or in the course of inter-State trade & commerce or in the course of export outside the country and also sold locally against Declaration Form No. ST-15. It was stated that at the relevant time the local sales including sales in the course of inter-State trade & commerce and in the course of export from the State of Haryana was about 30 to 35%. The appellant was a registered dealer both under the Haryana Act and the Central Sales Tax Act, and had been submitting its quarterly returns and paying the sales-tax in accordance with law, according to the appellant. In 1979, the assessing authority, Faridabad, imposed upon the appellant the purchase tax under Section 9 of the Act for the assessment year 1973-74 and subsequently for the years 1974-75 and 1975-76 as well on the despatches made by the appellant on the manufactured goods to its various depots outside the State. Subsequently, the relevant revenue authorities sought to impose purchase tax under Section 9(1) of the Act and imposed purchase tax on despatches of manufactured goods, namely, tyres and tubes, to its various depots in other States. This led to the filing of various writ petitions in the Punjab & Haryana High Court by the appellant/petitioner.
In respect of the assessment years 1976-77 to 1979-80.
these questions were considered by the Punjab and Haryana High Court, and the writ. petitions were decided in favour of the appellant on December 524 4, 1982. The said decision being the decision in Goodyear India Ltd. v. The State of Haryana & Anr. is reported in 53 STC 163. The Division Bench of the High Court in the said decision held that both on principle and precedent, a mere despatch of goods out of the State by a dealer to his own branch while retaining both title and possession thereof, does not come within the ambit of the phrase "disposes of the manufactured goods in any manner otherwise than by way of sale", as employed in section 9(1)(a)(ii) of the Act. The High Court further held that the decision of this Court in The State of Tamil Nadu v. M.K. Kandaswami, [1975] 36 STC 191 was no warrant for the proposition that a mere despatch of goods was within the ambit of disposing them of. The High Court also distinguished the decision of this Court in Ganesh Prasad Dixit v. Commissioner of Sales Tax, M.P., [1969] 24 STC 343, and held that Notification No. S.O. 119/H.A. 20/73/Ss. 9 & 15/74 dated July 19, 1974 issued under Section 9 (prior to its amendment by Act No. 11 of 1979) was ultra vires of Section 9 of the Act. It was held that whereas the section provided only for the levy of purchase tax on the disposal of manufactured goods, the impugned notification by making a mere despatch of goods to the dealers themselves taxable, in essence, legislates and imposes a substantive tax which it obviously could not. It was held that this was contrary to and in conflict with the provisions of section 9. The High Court referred to the relevant portion of unamended Section 9 of the Act with which it was confronted and the notification. In order to appreciate the said decision and the position, it will be appropriate to set out the said provisions, namely, the unamended provisions of Section 9 as well as the notification:
"9. Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and-(a) uses them in the State in the manufacture of,-(i) goods specified in Schedule B or (ii) any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the state or in the course of inter--State trade or commerce or within the meaning of sub-section (1) of Section 5 of the Central Sales Tax Act, 1956, in the course of export out of the territory of India, 525 (b) exports them, in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15." The relevant notification was as follows:
"Notification No. S.O. 119/H. A. 20/73/Ss. 9 and 15/74 dated the 19th July, 1974.
In exercise of the powers conferred by section 9 and subsection (1) of section 15 of the Haryana General Sales Tax Act, 1973, the Governor of Haryana hereby directs that the rate of tax payable by all dealers in respect of the purchases of goods other than goods specified in Schedules C and D or goods liable to tax at the first stage notified as such under section 18 of the said Act, if used by them for purposes other than those for which such goods were sold to them shall be the rate of tax leviable on the sale of such goods:
Provided that where any such dealer, instead of using such goods for the purpose for which they were sold to him, despatches such goods or goods manufactured therefrom at any time for consumption or sale outside the State of Haryana to his branch or commission agent or any other person on his behalf in any other State and such branch, commission agent or other person is a registered dealer in that State and produces a certificate from the assessing authority of that State or produces his own affidavit and the affidavit of the consignee of such goods duly attested by a Magistrate or Oath Commissioner or Notary Public in the form appended to this notification to the effect that the goods in question have been so despatched and received and entered in the account books of the consignee, the rate of tax on such goods shall be three paise in a rupee on the purchase value of the goods so despatched." The High Court, as stated before, referred to section 9 and held that the expression 'disposes of' was not basically a term of legal art and, therefore, it was proper and necessary to first turn to its ordinary 526 meaning in order to determine whether a mere despatch of goods by a dealer to himself would connote 'disposal of' such goods by him. The High Court referred to the dictionary meaning of 'disposes of' in Webster's Third New International Dictionary. Reference was also made to 27 Corpus Juris Secundum, P. 345, and ultimately it came to the conclusion that the phrase 'disposes of' or 'disposal' cannot be possibly equated with the mere despatch of goods by a dealer to himself. After referring to the relevant provisions with which this Court was concerned in Kandaswami's case (supra), the High Court held that that case was no warrant for construing the expression 'despatch' as synonymous to 'disposal'. On the other hand, the court held that the decision of this Court emphasises that the expression 'disposal' of goods is separate and distinct from despatch thereof. According to the High Court, the same position was applicable to Ganesh Prasad Dixit's case (supra), and in those circumstances held that the term 'disposes of' cannot be synonymous with 'disposal', and once that is held then the notification mentioned above travelled far beyond what is provided in Section 9 of the Act, while the said provision provided only for levy of purchase tax on disposal of manufactured goods.
The High Court observed as follows:
"Once it is held as above, the impugned Notification No. S.O. 119/H.A. 20/73/Ss. 9 and 15/74 dated 19th July, 1974 (annexure P-2), plainly travels far beyond the parent section 9 of the Act. Whereas the said provision provided only for the levy of a purchase tax on the disposal of manufactured goods, the notification by making a mere despatch of goods to the dealers themselves taxable in essence, legislates and imposes a substantive tax which it obviously cannot.
Indeed, its terms run contrary to and are in direct conflict with the provisions of section 9 itself. There is thus no option but to hold that the notification, which is a composite one, is ultra vires of section 9 of the Act and is hereby struck down." The High Court also noted that though the challenged assessment orders were appealable, however, as the challenge was to the very validity of the notification which was obviously beyond the scope of the appellate authority, the writ petitions were entertainable as the assessment was based on the notification which was frontally challenged. As a result, the High Court quashed the notification and set aside the assessment orders. The said decision is under challenge in appeal to this Court.
527 It may be mentioned that sub-section (1) of section 9 of the Act had been introduced by the Haryana Act, 55 of 1976 in the Act. After the aforesaid decision of the High Court, the Haryana Legislature intervened and enacted the Haryana General Sales Tax (Amendment & Validation) Act, 1983 by which Section 9 of the principal Act was amended as follows:
"Amendment of Section 9 of Haryana Act 20 of 1973--in Section 9 of the principal Act,-(a) in sub-section (1) ,-(i) for clause (b), the following clause shall be substituted and shall be deemed to have been substituted for the period commencing from the 27th day of May, 1971, and ending with the 8th day of April, 1979, namely:
"(b) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956; or", (ii) after clause (b), the following clause shall be deemed to have been inserted with effect from the 9th day of April, 1979, namely:
"(bb) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of Sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of Sub-Section (1) of Section 5 of the Central Sales Tax Act, 1956; or"; 528 {iii) the following proviso shall be added, namely:
"Provided that no tax shall be leviable under this section on scientific goods and guar gum, manufactured in the state and sold by him in the course of export outside the territory of India within the meaning of Sub-section (3) of Section .... of the Central Sales Tax Act, 1956."; and (b) in sub-section (3), the words "other than Railway premises" shah be omitted." After the aforesaid amendment the writ petitions were filed in the High Court by Bata India Ltd. In the meantime, the petitioner Company also filed writ petitions for the assessment years 1973-74 to 1975-76 and 1980-81 in the High Court challenging the assessment. The High Court decided these matters on August 2, 1983. The said decision Bata India Ltd. v. The State of Haryana & Anr. has been reported in 1983 Vol. 54 STC 226. The High Court held that "mere despatch of goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce" is synonymous with or is in any case included within the ambit of the consignment of goods either to the person making it or to any other person in the course of inter-State trade or commerce as specified in Article 269(1)(h) and Entry No. 92-B of List 1 of the 7th Schedule to the Constitution. Hence, the levy of sales or purchase tax on such a despatch or consignment of goods and matters ancillary or subsidiary thereto, will be within the exclusive legislative competence of Parliament to the total exclusion of the State Legislature. Therefore, section 9(1)(b) of the Haryana General Sales Tax Act, 1973, as amended by the Haryana General Sales Tax (Amendment & Validation) Act, 1983, insofar as it levies a purchase tax on the consignment of goods outside the State in the course of inter-State trade or commerce is beyond the legislative competence of the State of Haryana and is void and inoperative. It was held that the retrospective validation of the notification of 19th July, 1974 referred to hereinbefore, and the consequential validation of all actions taken there under were liable to be quashed. The High Court further held that mere manufacture and consignment of goods outside the State to himself by a manufacturer is not sale or disposal thereof with the result that it will not be within the ambit of Entry No. 54 of List II of the 7th Schedule to the Constitution. Consequently, it was held that irrespective of the 46th Amendment, an attempt to tax the mere consignment or despatch of manufactured goods outside the State in the course of inter-State trade 529 or commerce will not come within the ambit of Entry No. 54 of List II of the 7th Schedule, and consequently of the competence of the respective State Legislatures. Even before the 46th Amendment, the mere consignment of goods in the course of inter-State trade or commerce was beyond the scope of the said Entry and thus not within the legislative competence of the States and was entirely within the parliamentary field of. legislation by .virtue of Article 248 and the residuary Entry No. 97 of List I.
The High Court was of the view that neither the original purchase of goods nor the manufacture thereof into the endproduct by itself attracts purchase tax and consequently are not even remotely the taxable events. What directly and pristinely attracts the tax and can be truly labelled as the taxing event under section 9(1)(b) of the Act is the threefold exigency of; (i) disposal of the manufactured goods in any manner otherwise than by way of sale in the State; or (ii) despatch of the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter--State trade or commerce, or (iii) disposal or despatch of the manufactured goods in the course of export outside the territory of India. It was these three exigencies only which were the taxable events in the amended section 9(1)(b) of the Act. Consequently, in a Statute where the taxable event is the despatch or consignment of goods outside the State, the same would come squarely within the wide sweep of Entry No. 92B of List I of the Constitution, and thus excludes taxation by the States.
The High Court was of the view that section 9 of the Act must be strictly construed as it was a charging section. If the charging section travels beyond the legislative Entry and thereby transgresses the legislative field, then the same cannot possibly be sustained. The constitutional changes brought by the 46th Amendment in Art. 269 of the Constitution read with the insertion of Entry No. 92B in the Union List, leave no doubt that the legislative arena of tax on the consignment of goods (whether to one's ownself or to any other person) in the course of inter-State trade or commerce and all ancillary or complementary or consequential matters, are now declared to be exclusively reserved for parliamentary legislation and any intrusion into this field by the State Legislatures would be barred.
In my opinion, the High Court correctly noted in the said decision that the provisions of constitutional change have to be construed, and such problems should not be viewed in narrow isolationism but on a much wider. spectrum and the principles laid down in Heydon's case 530 1584 3 Co. Rep 7a are instructive. Hence, in a situation of this nature, it was just and proper to see what was the position before the 46th Amendment of the Constitution, and find out what was the mischief that was sought to be remedied and then discover the true rationale for such a remedy.
In Black-Clawson International Ltd. v. Papierwerke WaldhofAschaffenburg Ag., [1975] 1 All ER 810, Lord Reid observed as follows:
"One must first read the words in the context of the Act as a whole, but one is entitled to go beyond that. The general rule in construing any document is that one should put oneself 'in the shoes' of the maker or makers and take into account relevant facts known to them when the document was made. The same must apply to Acts of Parliament subject to one qualification. An Act is addressed to all the lieges and it would seem wrong to take into account anything that was not public knowledge at the time. That may be common knowledge at the time or it may be some published information which Parliament can be presumed to have had in mind.
It has always been said to be important to consider the mischief which the Act was apparently intended to remedy. The word 'mischief' is traditional. I would expand it in this way. In addition to reading the Act you look at the facts presumed to be known to Parliament when the Bill which became the Act in question was before it, and you consider whether there is disclosed some unsatisfactory state of affairs which Parliament can properly be supposed to have intended to remedy by the Act ...." The state of affairs that the Parliament has sought to remedy by the 46th Amendment of the Constitution, was that prior to the promulgation each State attempted to subject the same transaction to tax on the nexus doctrine under its sales tax laws. Consequently, on the basis of one or the other element of the territorial nexus, the same transaction had to suffer tax in different States with the inevitable hardship to trade and consumers in the same or different States. The framers of the Constitution being fully aware of the problems sought to check the same by a somewhat complex constitutional scheme and by imposing restrictions on the States' power with regard to levy tax on the sale or purchase of goods under Art. 286. The High Court in the judgment referred to hereinbefore, mentioned these factors. It is in 531 this background that Art. 269 was amended and clause (3) was added to it. The effect, inter alia, is that the power to levy tax on the sale or purchase of goods is now referable to the legislative power vested in the States by virtue of Entry No. 54 in List II of the 7th Schedule. However, this legislative authority of the States is restricted by three limitations contained in Articles 286(1)(a), 286(1)(b) & 286(3) of the Constitution. It may be mentioned that Parliament by the 6th Amendment to the Constitution, enacted the Central Sales Tax Act, 1956, with the object to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of interState trade or commerce and to declare certain goods to be of special importance and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods shall be subject. In this connection, the High Court referred to the various propositions as mentioned by the Law Commission in its 61st Report rendered in May, 1974. It is not necessary to set out the same in detail. It was in the aforesaid historical background that the High Court construed the provisions in question and came to the conclusion that a plain reading of these would leave little manner of doubt that the legislative power to tax consignment transfers of goods from one branch of an institution to another branch thereof outside the State and all matters incidental, ancillary or complementary thereto were then declared to be vested in the Union of India to the total exclusion of the States. The High Court referred to the observations of this Court in Khyerbari Tea Co. Ltd. v. State of Assam, AIR 1964 SC 925; Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City, [1955] SCR 829 and Waverly Jute Mills Co. Ltd. v. Raymon & Co. (1) Pvt. Ltd., [1963] 3 SCR 209, and concluded that Entry 92B enabled the Union of India not only to tax the consignment of goods in the strict sense but also embraced all ancillary and complementary areas as well to the exclusion of the State Legislature there from. In the aforesaid light the High Court construed section 9(1)(b) of the Haryana Act, 1983. Analysing the provisions in detail it observed that Section 9 of the Act was a charging section for the levy of purchase tax.
It imposed liability for payment of purchase tax, therefore, it should be distinguished from the machinery section. The High Court examined the real nature of the business outside the State and found that there was merely a change in the physical situs of the goods without any change in the basic incidents of ownership and control. Therefore, in its true nature a mere despatch of goods outside the State to another branch of the original institution is not and never 532 can be the equivalent of a sale either as a term of art in the existing sales tax legislation and not remotely so in common parlance, and construing section 9(1)(b) of the Act, the High Court was of the view that the real taxing event is the despatch of the manufactured goods to a place outside the, State in any manner otherwise than by way of sale in the course of inter-State trade or commerce.
The High Court found that there was no distinction between the despatch as defined in the said amended section and the consignment of goods by the manufacturer to himself or any other person in the course of inter-State trade or commerce, and referred to the meanings of the expressions 'despatch' and 'consign', which are similar and almost interchangeable when used in specific commercial sense. The High Court referred to Webster's New International Dictionary, Shorter Oxford English Dictionary and also to Random House dictionary for their meanings. On construction, the High Court came to the conclusion that the amended provisions of section 9(1)(b) of the Act attempt to levy an identical tax in the garb of a levy on the despatch of manufactured goods to places outside the State of Haryana, and therefore intruded and trespassed into an arena exclusively meant for taxation by the Union of India. The High Court also viewed from another point of view, namely, who was liable as it was the consignment of goods which attracted the liability of purchase tax and in pristine essence was the "taxable event" under section 9(1)(b) of the Act. The High Court also analysed it from the point of view that under section 9(1)(b), where a dealer purchases goods for the express purpose of manufacturing other goods within the State, then in strict sense such purchase by itself did not attract any tax under the provisions. Hence, the High Court set aside the amended provision so far as it sought to levy purchase tax on the consignment of goods outside the State in the course of inter-State trade or commerce, consequently it also set aside the retrospective validation of the notification and the consequential validation of all actions taken thereunder. Special leave petitions were filed in this Court against the said decision of the High Court. These are special leave petitions Nos. 8397 to 8402 of 1983. During the pendency of the special leave petitions, show cause notices were issued by the assessing authority in respect of the assessment years 1973-74 to 1980-81 (except for 1978-79 & 1979-80) and also for 1982-83 asking the petitioner to show cause why in addition to purchase-tax, it should not be liable to penalty as well. The petitioner-Company again filed writ petitions in Punjab & Haryana High Court challenging the validity of those notices. It appears that in the meantime, a Full Bench of the High Court decided the question again in the case of Des Raj Pushap 533 Kumar Gulati v. The State of Punjab & Anr.. This decision was rendered on January 24, 1985, and is reported in 58 STC 393. The assessment years involved in all appeals are 197374 to 1982-83. According to the Full Bench, the taxing event is the act of purchase and not the Act of despatch or consignment as held in Bata India Ltd., (supra). In the premises, it was held that section 9(1)(b) as amended, was neither invalid nor ultra vires and overruled the decision of Bata India Ltd. The writ petitions filed were also dismissed.
The petitioner-Company filed special leave petitions against the aforesaid judgment of the Punjab & Haryana High Court which were admitted in Civil Appeals Nos. 1166-72/85.
Goodyear India also filed writ petition No. 3834 of 1985 in respect of the assessment year 1981-82, as the notices for assessment and penalty were received after the decision of Punjab & Haryana High Court in Des Raj Pushap Kumar's case (supra). The said decision was passed in appeal against the decision of the said court in Goodyear India reported in 53 STC 163, number being 1514 (NT) of 1984. All these questions are the subjectmatters of these appeals.
It is well-settled that what is the taxable event or what necessitates taxation in an appropriate Statute, must be found out by construing the provisions. The essential task is to find out what is the taxable event. In what is considered to be indirect tax, there is a marked distinction between the consequence of manufacture and the consequence of sale.
It is well to remember that in construing the expressions of the Constitution to judge whether the provisions like Section 9(1)(b) of the Act, are within the competence of the State Legislature, one must bear in mind that the Constitution is to be construed not in a narrow or pedantic sense. Constitution is not to be construed as mere law but as the machinery by which laws are to be made. It was observed by Lord Wright in James v. Commonwealth of Australia, [1936] AC 578 at 614, that the rules which apply to the interpretation of other Statutes, however, apply equally to the interpretation of a constitutional enactment. In this context, Lord Wright referred to the observations of the Australian High Court in The Attorney-General for the State of New South Wales v. The Brewery Employees Union etc., [1908] 6 CLR 469 where it was observed that the words of the Constitution must be interpreted on the same principles as any ordinary law, and these principles compel us to consider the nature and scope of the Act, and to remember that the Constitution is a mechanism under which laws 534 are to be made, and not a mere Act which declares what the law is to be. Hence, such mechanism should be interpreted broadly, bearing in mind in appropriate cases, that the Supreme Court like ours is a nice balance of jurisdictions.
A Constitutional Court, one must bear in mind, will not strengthen, but only derogate from its position if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution is a living and organic thing, which of all instruments has the greatest claim to be construed broadly and liberally. See the observations of Gwyer, C.J. in Re: Central Provinces & Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, AIR 1939 PC 1 at 4). Mr. Justice Sulaiman in his judgment at p. 22 of the report observed that the power to tax the sale of goods is quite distinct from any right to impose taxes on use or consumption. It cannot be exercised at the earlier stage of production nor at the later stage of use or consumption, but only at the stage of sale, (emphasis supplied). The essence of a tax on goods manufactured or produced is that the right to levy it accrues by virtue of their manufacture. On the other hand, a duty on the sale of goods cannot be levied merely because goods have been manufactured or produced. Nor can it be levied merely because the goods have been consumed or used or even destroyed. The right to levy the duty would not at all come into existence before the time of the sale. In this connection, reference may be made to the observations of Chief Justice Gwyer in The Province of Madras v. M/s. Boddu Paidanna & Sons, AIR 1942 FC 33.
Mr Raja Ram Agarwala, learned counsel for the appellant/assessees, contended before us that it is necessary to find out or identify the taxable event. If on a true and proper construction of the amended provisions of section 9(1)(b) it is the despatch or consignment of the goods that is the taxable event as contended by the petitioners and appellants, then the power is beyond the State's competence.
If, on the other hand, it is the purchase of the goods that is the taxable event as held by the Full Bench of the High Court, then it will be within its competence. The Full Bench in Des Raj Pushap Kumar's case (supra) has relied on the background of the facts and the circumstances which necessitated the introduction of the amendment.
Mr. Tewatia, learned counsel appearing for the State canvassed before us the historical perspective and stated that Haryana State came into being as a result of the Punjab State Reorganisation Act, 1966, therefore, part of the legislative history of the taxing Statute like any other Statute is shared by the Haryana State with the Punjab State, and as such it is proper to notice the concept of purchase tax as it 535 evolved in the State of Punjab. Purchase-tax was introduced in the State of Punjab for the first time by the East Punjab General Sales Tax (Amendment) Act, 1958. Section 2(ff) was introduced for the first time to define the expression 'purchase'. The definition of the term 'dealer' was changed to include therein a purchaser of goods also. The definition of the term 'taxable turnover' was also altered. Some dealers who crushed oil-seeds, were called upon to pay purchase tax on the raw-material purchased by them on the ground that the raw material had not been subjected to a manufacturing process as the process of crushing oil-seeds did not involve a process of manufacturing. He referred to the fact that Punjab had originally exempted purchase tax on the purchase of raw-material by the dealers if such raw-material was to be used for the manufacture of goods for sale in Punjab and thus generate more revenue to the State as a result of the sales tax on such manufactured goods. But when the dealers started avoiding this condition for sale in Punjab by various ingenious devices after having escaped the payment of purchase tax on the raw-material purchased by them, the Legislature amended the Act and Punjab Act No. 18 of 1960 was brought on the statute-book w.e.f. April 1, 1960. Section 2(ff) of the Act was amended and it provided that all the goods mentioned in Schedule C when purchased shall be exigible to purchase tax and thus the concession given to the manufacturers was withdrawn. Explaining this background, Mr. Tewatia contended that section 9, sub-section (i) of the Act envisages payment of tax at such rate as may be notified under Section 15 on the purchase of goods from any source within the State by a dealer liable to pay tax under the Act when such goods, not being Schedule 'B' goods, were consumed either in producing Schedule 'B' goods or when the manufactured goods were other than Schedule 'B' goods, the same not being sold within the State or in the course of inter-State trade or commerce, or in the course of export outside the territory of India, or the purchased goods were exported outside the State.
After referring to the relevant provisions and the provisions of section 9(1)(b), Mr Tewatia emphasised that the contingency contemplated by "or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of section 5(1) of the Central Sales Tax Act, 1956; or" as well as clause (c) of section 9(1) which encompasses "purchases goods, other than those specified in Schedule B, from any source in the State and exports them, in the circumstances in which no tax is payable under any other provision of 536 this Act, there shall be levied, subject to the provisions of Section 17, a tax on the purchase of such goods at such rate as may be not