titions Nos 133 165 169 172 185 218 219 227 228 230239 252 253 248 and 249 1968
Petition under article 32 of the Constitution of India for the enforcement of the fundamental rights
SV Gupte SK Mehta and KL Mehta for the petitioners in WP No 133 of 1968
CD Garg SK Mehta and KL Mehta for the petitioners in WP No 165 of 1968
Harder Singh for the petitioners in WPs
Nos 169 and 170 of 1968
VC Mahajan SK Mehta and KL Mehta for the petitioners in WPs
171172 218 219 227 228 230 239 248 249 252 and 253 of 1968
MC Chagla AN Sinha and BP Jha for the petitioners in WP No 185 of 1968
Niren De Solicitor General OP Malhotra and RN Sachthey for the respondents in WP Nos 133 and 165 of 1968
A nand Saroop Advocate General for the State of Haryana and RN Sachthey for the respondents in WP Nos 218 219 227  228 of 1968
OP Malhotra and RN Sachthey for the respondents in WP Nos
169 to 172 of 1968
RN Sachthey for the respondents in WP Nos 185 230 239 248 249 252 and 253 of 1968
B Datta and PC Bharatari for the interveners in WP No 165 of 1968
546 The Judgment of the Court was delivered by Hidayatullah CJ
These are 17 petitions challenging the validity of the Punjab General Sales Tax Amendment and Validation Act 1967 Act No 7 of 1967 by the Punjab Legislature and the Punjab Sales Tax Haryana Amendment and ValidationAct 1967
Thirteen of these petitions challenge the Punjab Amendment Act and four challenge the Haryana Amendment Act
The petitioners are firms or companies dealing in cotton or oil seeds
Their business is to purchase ginned and unginned cotton for manufacturing yarn and selling the said cotton also to registered and unregistered dealers both inside and outside the State
The petitioners of the second category purchase oil seeds for use in manufacture of edible oils
The surplus oil seeds are sold to other dealers registered or unregistered inside and outside the State of Punjab
Both these commodities are essential commodities to which the Central Sales Tax Act applies
Certain provisions of these Amending Acts are challenged on the ground that they offend section 15 of the Central Act and are also unconstitutional being in violation of Articles 14 and 19
The Punjab General Sales Tax Act was passed in 1948
It was amended from time to time
The Act as it stood on April 1 1960 was challenged in Bhawani Cotton Mills Ltd vs State of Punjab and anr1
On April 10 1967 this Court by majority struck down certain portions of the Act on the ground that they were in conflict with the provision of section 15 of the Central Act
On November 1 1966 the former State of Punjab bifurcated and the States of Punjab and Haryana came into existence
On December 29 1967 the Punjab Legislature enacted Act 7 of 1967 amending the original Act and the following day the President s Act intituled the Punjab General Sales Tax Haryana Amendment and Validation Act 1967 Act No 14 of 1967 was passed for Haryana
Both the Acts were preceded by Ordinances which they replaced
It is not necessary to refer to the Ordinances
Section 15 of the 54 of 1956 provided as follows 15
Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State
Every sales tax law of a State shall in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods be subject to the following restrictions and conditions namely  1  547 a the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent of the sale or purchase price thereof and such tax shall not be leviable at more than one stage b where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter State trade or commerce the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State
 The section provides that in respect of declared goods the tax sales or purchase shall not exceed the prescribed limit and shall not be levied at more than one stage and shall be refunded to persons from whom it is collected if the goods are sold in the course of inter state trade or commerce
The original Punjab General Sales Tax Act 1948 was challenged before this Court in Bhawani Cotton Mills Ltd s case1
The Act in defining the tax able turnover in section 5 2 allowed certain deductions and one such deduction in cl
vi was    turnover during that period on the purchase of goods which are sold not later than six months after the close of the year to a registered dealer or in the course of inter State trade or commerce or in the course of export out of the territory of India Provided that in the case of such a sale to a registered dealer a declaration in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold is furnished by the dealer claiming deduction
 The original section as it stood on April 1 1960 read as follows 5
Rate of tax
1 Subject to the provisions of this Act there shall be levied on the taxable turnover every year of a dealer a tax at such rates not exceeding four naye paise in a rupee as the State Government may by notification direct Provided       1  548 Provided further that the rate of tax shall not exceed two naye paise in a rupee in respect of any declared goods as defined in clause c of section 2 of the  and such tax shall not be levied on the purchase or sale of such goods at more than one stage Provided   2 In this Act the expression taxable turnover means that part of a dealer s gross turnover during any period which remains after deducting therefrom a his turnover during that period on i     ii sales to a registered dealer of goods declared by him in a prescribed form   vi the purchase of goods which are sold not later than six months after the close of the year to a registered dealer or in the course of inter State trade or commerce or in the course of export out of the territory of India Provided that in the case of such a sale to a registered dealer a declaration in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold is furnished by the dealer claiming deduction
It was contended in that case that section 2ff 5 1 second proviso and 52avi were in conflict with section 15 of the Central Act
Bhawani Mills were dealers registered under the Punjab General Sales Tax Act 1948 and for the assessment years 1960 61 1961 62 and 1962 63 the Mills denied their liability to the Central Sales Tax on the purchase of cotton in the accounting year
The scheme of the Act then in force put the tax on purchase of cotton which was a declared commodity at the rate of 2 naye paise in a rupee
By the second proviso to section 5 1 it was further provided that such tax shall not be levied on the purchase or sale of such goods at more than one stage
The word dealer  at that time was defined as follows 549 Dealer means any person including a Department of Government who in the normal course of trade sells or purchases any goods that are actually delivered for the purpose of consumption in the State of Punjab
irrespective of the fact that the main place of business of such person is outside the said State and where the main place of business of  any such person is not in the said State dealer  includes the local manager or agent of such person in Punjab in respect of such business
 The provisions for taxing purchases of cotton were challenged on the ground that there was a possibility of the tax being levied at more than one stage the provisions of the second proviso notwithstanding
The argument was summarized by our brother Vaidialingam thus In this case according to the appellant it has to send quarterly returns even during the accounting year and as per section 104 of the Act it has to pay also tax
in accordance with the returns submitted by it for every quarter
In the returns that are being sent the dealer will have to include all purchases of cotton effected by him during the quarter for which the return is sent
There is no indication either in the Act
or in the rules or the forms prescribed as to whether the persons from whom the appellant purchased cotton have paid tax or not
Section 15 of the Central Act is not restricted only to registered dealers
There will also be nothing to guide the appellant to know as to whether the goods purchased by it have been sold to it by its vendor within the period mentioned in cl
vi of section 52a of the Act
Under those circumstances there is always a possibility or even a certainty of more persons than one having paid tax or being made liable to pay tax in respect of the same goods at different stages
That is quite opposed to the provisions of section 15 a of the Central Act
Even otherwise it is pointed out that if a person has purchased cotton and sells it after the period provided for in section 5 2a vi that party is liable to pay sales tax and would have also paid the same
Another purchaser from the said party will also be liable to pay tax
on the same commodity if he sells the goods after the period mentioned in cl
That is two persons are made liable for payment of tax in respect of the same commodity
In other words the purchases of the same item of declared goods by the persons indicated above are made liable for tax whereas under the Central Act
there can be only one levy and collection of tax at one stage either on sale or on purchase 550 Learned counsel in that case showed by way of contrast how the Madras Mysore Andhra Pradesh and UP had avoided such a consequence
In answer it was pointed out by the State that since the tax was levied whether on sale or purchase at the very first transaction the stage was fixed and that the dealer could always claim exemption under section 52avi or a refund under section 12 of the Act
This Court in its majority judgment did not consider that the second proviso to section 5 1 by its mere declaration prevented the levy of tax at more than one stage
The difficulty however remained that the Act itself did not indicate the stage at which the tax was to be levied and because under section 151 of the Central Act there could be no liability for payment of tax unless this stage was so stated in the Act or the rules thereunder
It was pointed out that a dealer would have to show in his return all purchases of cotton and pay the tax with his return
There was nothing which would have enabled the dealer to know whether the tax had already been paid by another dealer and to exclude from his return those transactions
The dealer could not take a chance as heavy penalties were provided
This was particularly so where the goods passed through an unregistered dealer s hands at an intermediate stage
In dealing with the latter part of the reasons this Court gave an example which may be quoted here   if a dealer A  sells the declared foods to B  six months after the close of the year B being a registered dealer A becomes liable to purchase tax
But if B sells the identical declared goods again after the period mentioned in sub el vi he will also be liable to pay purchase tax
That means in respect of
the same item of declared goods more than one person is made liable to pay tax and the tax is also levied at more than one stage
That is not permissible under section 15a of the Central Act
If goods are resold to a nonregistered dealer within the period sub el
vi will not help the original purchaser
We may also point out at this stage that sub cl
vi of section 52a negatives the assumption that the normal rule under the Act in respect of declared goods is to levy the tax on the first purchaser
 This Court then referred to section 12 where there is a provision for refund which taken with rules 48 58 allowed for refund to be claimed and found the provisions insufficient to get over the difficulty
This Court observed Even in the matter of obtaining refunds there can be no controversy that the appellant will have to place before the officer concerned particulars of transactions connected with the commodity in question and also the 551 basis on which it claims the relief
It will be absolutely difficult if not impossible for persons like the appellant to collect materials in this behalf because there is no provision contained either in the Act or the rules on the basis of which it will be entitled to be supplied with all the material information relevant for sustaining a request for refund
If the Central Act makes it mandatory that the tax can be collected only at one stage in our opinion it is not enough for the State to say that a person who is not liable to pay tax must nevertheless pay it in the first instance and then claim refund at a later stage
We may state that the question as to how far a party can ask for refund without the order of assessment being set aside by appropriate proceedings is highly doubtful because at the time when the actual order of assessment is passed in certain eases it may not be possible for a party to say whether he is entitled to exemption or not under sub cl
vi of section 52 of the Act
If a person is not liable for payment of tax at all at any time the collection of a tax from him with a possible contingency of refund at a later stage will not make the original levy valid because if particular sales or purchase are exempt from taxation altogether they can never be taken into account at any stage for the purpose of calculating or arriving at the taxable turnover and for levying tax Relying upon the observations in 4
V Fernandez vs State of Kerala 1 this Court concluded   the provisions contained in a statute with respect to exemptions of tax or refund or rebate on the one hand must be distinguished from the total nonliability or non imposition of tax on the other
These observations also in our opinion effectively provide an answer to the stand taken by the State in this ease that section 12 of the Act provides an adequate relief by way of refund even if tax is collected at an earlier stage The Amending Acts which are now challenged set about removing these difficulties
These amendments are again challenged on the same lines
It is convenient to take the two Amending Acts separately
First we shall take up for consideration the Punjab amendments
Here we are concerned only with a few of the amendments made by the Amending Act 7 of 1967
Section 5 was amended retrospectively from different dates
In subsection 1 in the second proviso the words as defined in el  552 of section 2 of the  and such tax shall not be levied on the purchase of sale of such goods at more than one stage are now omitted
After the second proviso another proviso is introduced In sub section
1 A the words in respect of such goods other than declared goods are substituted retrospectively from 16th December 1965 for the words in respect of such goods  After sub section
2 a new sub section 3 from October 11958
We may now set out the 5th sub section as it emerges from the amendment before we deal with the objections Section 5 Rate of tax 1 Subject to the provisions of this Act there shall be levied on the taxable turnover of a dealer a tax at such rates not exceeding six naye paise in a rupee as the State Government may by notification direct
 2 In this Act the expression taxable turnover means that part of a dealer s gross turnover during any period which remains after deducting therefrom a his turnover during that period on i  
vi the purchase of  goods which are sold not later than six months after the close of the year to a registered dealer or in the course of inter State trade or commerce or in the course of export out of the territory of India Provided that in the case of such sale to a registered dealer a declaration in the prescribed front and duly filled and signed by the registered dealer to whom the goods are sold is furnished by the dealer claiming deduction
3 Notwithstanding anything contained in this Act a in respect of declared goods tax shall be levied at one stage and that stage shall be i in the case of goods liable to sales tax the stage of sale of such goods by the last dealer liable to pay tax under this Act ii in the case of goods liable to purchase tax the stage of purchase of such goods by the last dealer liable to pay tax under this Act b the taxable turnover of any dealer for any period shall not include his turnover during that period 553 on any sale or purchase of declared goods at stage other than the stage referred to in subclause i
or as the case may be sub clause ii of clause a
 In addition a new section section 11 AA was added to the following effect 11 AA
Review of certain assessments etc
of tax on declared goods  1 Notwithstanding anything contained in this Act
the Assessing Authority shall whether or not an application is made to him in this behalf review all assessments and reassessments made before the commencement of the Punjab GeneraI Sales Tax Amendment and Validation Act 1967 in respect of declared goods and make such order varying or revising the order previously made as may be necessary for bringing the order previously made into conformity with the provisions of this Act as amended by the Punjab General Sales Tax Amendment and Validation Act1967 Provided that no proceeding for review shall be initiated without giving the dealer concerned a notice in writing of not less than thirty days
2 Any dealer on whom a notice is served under sub section 1 may within thirty days from the date of receipt of such notice intimate in writing the assessing authority of his intention to abide by the assessment or reassessment sought to be reviewed and if he does so
the assessing authority shall not review such assessment or reassessment under this section
3 No order shall be made under this section against any dealer without giving such dealer a reasonable opportunity of being heard
4 Notwithstanding anything contained in any judgment decree or order of any court or other authority to the contrary but subject to the provisions of the foregoing sub sections any assessment
reassessment
levy or collection of any tax in respect of declared goods made or purporting to have been made and any  action or thing taken or done or purporting to have done in relation to such assessment
are assessment
levy or collection under the provision of this Act before the commencement of the Punjab General 554 Sales Tax Amendment and Validation Act 1967 shall be as valid and effective as if such assessment reassessment levy or collection or action or thing had been made taken or done under this Act as amended by the Punjab General Sales Tax Amendment and ValidationAct 1967
 The argument is that the position has not altered at all even after the amendments and the liability to taxation at different stages remains still and the Act continues to be in conflict with the Central Act on the same reasons on which Bhawani Mills case1 proceeded
It is argued that the amendments have been made retrospective but no machinery is provided to enable the dealer to discover that the goods had been taxed before and the single stage at which the tax is to be levied is still not clearly discernible
This is the main argument but there are many supplementary arguments which we shall notice later
For the present we confine our attention to the main point
The stage of tax is now stated in section 53i and ii
In the case of sales tax the stage of tax is the sale of such goods by the last dealer liable to pay the tax and in the case of purchase tax the stage is purchase by the last dealer liable to pay the tax
It is also provided that the turnover of any dealer for any period shall not include his turnover during that period of any sale or purchase of declared goods at any other stage than the stage so mentioned
It will be seen that the matter is now in the hands of the dealer
He has to find out for himself whether he is liable to pay the tax or not
A dealer knows what he has done with his goods or is going to do with them
If he knows that he is not the last dealer having parted with the goods to another dealer or he knows that he is going to use the goods or sell them to consumers he knows when  he is not liable to tax and when he is
Therefore he will not include the transaction in his taxable turnover in the first case but include it in the second
Goods in the hands of a dealer are not taxed
They are only taxed on the last purchase or sales
This information is always possessed by a dealer and by providing that he need not include in his turnover any transaction except when he is the last dealer the position is now clear
It is contended that even so the dealer may not know that he is the last dealer and may make some mistake
The law does not take into account the actions of persons who are negligent or mistaken but only of persons who act correctly according to law
If the dealer is clear about his own position he is now quite able see whether he is the last purchaser liable to pay the tax or the last seller liable to pay the tax
The Act by Specifying the stage  555 as the last purchase or sale by a dealer liable to pay the tax makes the stage quite clear and by giving an option to him not to include such transactions in his return saves him from the liability to pay the tax till he is the dealer liable to pay the tax
In our opinion therefore the present provisions of the Act are quite clear and are quite sufficient to make the amended Act accord with the Central Act
The arguments noted in the earlier case of this Court do not therefore arise
It will thus be seen that the present Act does not suffer from any of the defects from which the unamended Act had suffered
It is however contended that the Act has been made retrospective but no machinery is provided to discover if the declared goods were assessed to tax more than once
As we have already pointed out the matter is within the ken of the dealer himself and it is for him to decide whether he would not claim the benefit of section 11AA and ask for a refund or in future transactions delete the sales from his taxable turnover when he is not the last dealer liable to pay the tax
Therefore the retrospectivity of the Act does not make any difference
It is not contended before us that it was not within the competence of the Punjab Legislature to pass such an Act retrospectively
The defect pointed out is the self same defect which was noticed in Bhawani Mills case1
But that defect no longer exists
It is argued further that there is a discrimination between the two kinds of manufacturers
In the definition of dealer  in section 2d and in the proviso to section 1 IAA it is submitted discrimination arises because of the opportunity given to a dealer to ask for reassessment or to submit to the old assessment
This is open to every dealer and the intention is to give an opportunity to the dealer himself leaving it to his own will whether to ask for a refund or not
This hardly can be said to create a discrimination
Lastly it is contended that there is a delegated legislation in that the maximum has been provided without indication of the circumstances under which the tax is to be levied
This it is said creates unguided delegation to administrative authority the function of the legislature
It is to be noticed that the Central Act itself gives power to the legislature to choose a rate of tax at not more than 3 per cent of the taxable turnover
The tax levied is well within that limit and therefore the legislature has chosen the maximum and has left it free to the authorities to impose the tax within that maximum regard being had to the requirements of revenue and the expenditure necessary for the State
We may now deal with some arguments which are common both sets of cases before considering the case of the Haryana amendment
It is argued that the organisation of the State 1  556 took place on November 1 1966 and the amendment in some of its parts seeks to amend the original Act from a date anterior to this date
In other words the legislature of one of the States seeks to amend a law passed by the composite State
This argument entirely misunderstands the position of the original Act after the reorganisation
That Act applied now as an independent Act to each of the areas and is subject to the legislative competence of the legislature in that area
The Act has been amended in the new States in relation to the area of that State and it is inconceivable that this could not be within the competence
If the argument were accepted then the Act would remain unamendable unless the composite State came into existence once more
The scheme of the States Reorganization Acts makes the laws applicable to the new areas until superseded amended or altered by the appropriate legislature in the new States
This is what the legislature has done and there is nothing that can be said against such amendment
In regard to Haryana cases also the same arguments are urged
It is contended that the amended Act there also offends section 15 for the reasons which we have given
Neither the amendment of section 55 in this area nor the introduction of section 11AA for refund offends against section 15 of the Central Act or the equality clause of the Constitution
It is said that pending cases will always be reconsidered whether or not an application in that behalf is made but in the case of disposed of cases it depends upon the party to intimate in writing that he has no objection to the assessment or reassessment already made
If any objection can be taken it will be by those whose cases are pending and not by those whose cases have been closed
The option to submit to the assessment is open to every one alike and there is no discrimination if a party wants that his case need not be reconsidered
He has only to state that in writing and that would be the end of the matter
If he wants his case to be reconsidered then he can go before the Tribunal and get his case reconsidered
It is also urged in this connection that there is a discrimination between the imported goods and local goods
It is said that the discrimination is also between the first purchase in the case of imported goods and last sale in the case of local goods
Since the imported goods might be more expensive by reason of freight etc
or intermediary sales having taken place it is said
that the burden of tax will be heavier and therefore this will offend against the equality clause and article 304 of the Constitution
In our opinion this argument is without any substance
The rate of tax same in every case
In State of Madras vs
NK Nataraja Mudaliar1
this Court stated that the essence of articles 301 and 303 is to enable the State by a law to impose on goods imported 1 1969 SCR 557 from other States or the Union territories any tax to which similar goods manufactured or produced in the State are subject so however as not to discriminate between goods so imported and goods so manufactured or produced
 It was pointed out by this Court that imposition of differential rates of tax by the same State on goods manufactured or produced in the State and similar goods imported in the State is prohibited by that clause
But where the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or producedArt
304 has no application
Here also the tax is at the same rate and therefore the tax cannot be said to be higher in the case of imported goods
It may be that when the rate is applied the resulting tax is somewhat higher but that does not offend against the equality contemplated by article 304
That is the consequence of ad valorem tax being levied at a particular rate
So long as the rate is the same Art304 is satisfied
Even in the case of local manufactures if their cost of production varies the net tax collected will be more or less in some cases but that does not create any inequality because inequality is not the result of the tax but results from the cost of production of the goods or the cost of their importation
This ground therefore has also no substance
We do not think it necessary to set down here the provisions of the Haryana Amendment Act because they follow the scheme of the Punjab Amendment Act in substance and what we have said in regard to the Punjab Amending Act applies mutatis mutandis to Haryana Amendment Act also
In the result these petitions have no substance
They are dismissed with costs
One set of hearing fee
YP Petitions dismissed


Summary:
In Bhawani Cotton Mills vs Stale of Punjab 119671 3 S C R 577 this Court struck down section 51 second proviso and sections 52avi of the Punjab General Sales Tax Act 1948 as contravening section 15 of the Central Sales Tax Act 1955
because neither the Punjab Act nor the rules made thereunder indicated as required by the Central Act the stage at which tax was to be levied
After the formation of the new States of Punjab and Haryana the Act was amended by the legislatures of the two States by Act 7 of 1967 and 14 of 1967 respectively
The amendments fixed it at the stage of sale or purchase of respectively goods by the last dealer liable to pay tax
In a writ petition before this Court the petitioners contended that i the position had not altered at all even after the amendments and the liability to taxation at different stages still remained and therefore the Act continned to be in conflict with the Central Sales Tax Act ii the legislatures of the two States were not competent to amend retrospectively an act passed by the composite State iii by leaving it free to the executive to impose the tax within the maximum fixed there was excessive delegation of legislative functions iv there was discrimination in the new section 11AA and the opportunity given to a dealer to ask for reassessment or to submit to the old assessment and v the Act discriminated between imported goods and local goods and therefore contravened the equality clause and article 30
of the Constitution
HELD Dismissing the petition
1 The Act by specifying the stage its the last purchase or sale a dealer liable It pay the tax makes the stage quite clear
The matter now in the hands of the dealer and he has to find out for himself whether he is liable to pay the tax or not
A dealer knows what he has done with his goods or is going to do with them
By providing that he need not include in his turnover any transaction except when he is the last dealer the position is now made clear
553 F G 2 The competency of the Icgislatures of Punjab and Haryana to amend an Act passed the composite State cannot be questioned
After reorganisation the Act applied as an independent Act to each of the areas and is subject to the legislative competence of the legislature in that area
556 B 3 There is no abdication of legislative funtions in favour of the administrative authoritv as the Central Act itself gives power to the legislature to choose a rate of tax at not more than 3 of the taxable turnover
The tax levied is well within that limit and therefore the legislature has chosen the maximum and has left it free to the 545 authorities to impose the tax within that maximum regard being had to the requirements of revenue and the expenditure necessary for the State
555 G 4 The opportunity given to a dealer in section 11AA to ask for reassessment or to submit to the old assessment does not result in discrimination
This is open to every dealer and the intention is to give an opportunity to the dealer himself leaving it to his own will whether to ask for a refund or not
555 E F 5 When a taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced
Article 304 has no application
So long as the rate is the same article 304 is satisfied
In the instant case the tax is at the same rate and therefore tax cannot be said to be higher in the case of imported goods
When the rate is applied the resulting tax may be somewhat higher but that does not contravene the equality contemplated by article 304
557 B C State of Madras vs
NK Natraja Mudaliar 1969 1 SCR referred to