vil Appeals Nos
1166 72 of 1985 etc
From the Judgment and Order dated 24185 of the Punjab  Haryana High Court in CWP Nos
698 to 703 and 733 of 1984
Raja Ram Aggarwal B Sen Dr Devi Paul DS Tawatia Soli J Sorabjee Kapil Sibal and SK Dholakia AN Haka sar DN Misra Mukul Mudgal Ravinder Narain PK Ram section Sukumaran section Ganesh Mahabir Singh HS Anand
R Karania wala Mrs Manik Karanjawala AS Bhasme and AM Khanwil kar 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 91 and 243 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 ques tion of the Act and then with the provisions of the Bombay Act as mentioned hereinbefore
The appellantpetitioner Goodyear India Ltd was engaged at all relevant times inter alia in the manufac ture 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 Declara tion 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 regis tered dealer both under the Haryana Act and the  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 Farida bad imposed upon the appellant the purchase tax under Sec tion 9 of the Act for the assessment year 1973 74 and subse quently 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 91 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 appellantpetitioner
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 vs 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 91aii of the Act
The High Court further held that the decision of this Court in The State of Tamil Nadu vs MK 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 vs Commissioner of Sales Tax MP 1969 24 STC 343 and held that Notification No SO 119HA 2073Ss 9  1574 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 notifica tion 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  in the course of export out of the territory of India 525 b exports them in the circumstances in which no tax is pay able under any other provision of this Act there shall be levied subject to the provi sions 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 SO 119H A 2073Ss 9 and 1574 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 notifica tion 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 neces sary 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 Internation al 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 possi bly 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 con struing the expression despatch  as synonymous to dispos al 
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
Ac cording to the High Court the same position was applicable to Ganesh Prasad Dixit s case supra and in those circum stances held that the term disposes of  cannot be synony mous with disposal  and once that is held then the notifi cation 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 SO 119HA 2073Ss 9 and 1574 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 speci fied in Schedule B from any source in the State and uses them in the State in the manu facture 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  or ii after clause b the following clause shall be deemed to have been inserted with effect from the 9th day of April 1979 name ly bb purchases goods other than those speci fied 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  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  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 vs 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 2691h 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 exclu sive legislative competence of Parliament to the total exclusion of the State Legislature
Therefore section 91b of the Haryana General Sales Tax Act 1973 as amended by the Haryana General Sales Tax Amendment  Vali dation 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 inopera tive
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 Con stitution
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 compe tence of the States and was entirely within the parliamen tary 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 end product 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 91b of the Act is the three fold 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 91b 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 article 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  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 reme died and then discover the true rationale for such a remedy
In Black Clawson International Ltd vs Papierwerke Waldhof Aschaffenburg Ag
   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 qualifica tion
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 impor tant 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 pur chase of goods under article 286
The High Court in the judg ment referred to hereinbefore mentioned these factors
It is in 531 this background that article 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 2861a 2861b  2863 of the Constitution
It may be mentioned that Parlia ment by the 6th Amendment to the Constitution enacted the  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 distri bution of taxes on sales of goods in the course of inter State 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 insti tution 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 vs State of Assam   Navinchandra Mafatlal vs The Commissioner of Income tax Bombay City 1955 SCR 829 and Waverly Jute Mills Co Ltd vs Raymon  Co 1 Pvt Ltd   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 therefrom
In the aforesaid light the High Court construed section 91b of the Haryana Act 1983
Analy sing 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 91b 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 Diction ary 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 provi sions of section 91b 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 exclu sively 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 attract ed the liability of purchase tax and in pristine essence was the taxable event under section 91b of the Act
The High Court also analysed it from the point of view that under section 91b 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 noti fication 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 chal lenging 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 vs 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 1973 74 to 1982 83
According to the Full Bench the taxing event is the act of purchase and not the Act of despatch or con signment as held in Bata India Ltd supra
In the prem ises it was held that section 91b as amended was neither invalid nor ultra vires and overruled the decision of Bata India Ltd The writ petitions filed were also dis missed
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 7285
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 expres sions of the Constitution to judge whether the provisions like Section 91b 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 ob served by Lord Wright in James vs Commonwealth of Australia 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 vs The Brewery Employees Union etc
  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 con strued broadly and liberally
See the observations of Gwyer CJ 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 consump tion
It cannot be exercised at the earlier stage of produc tion 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 vs Ms Boddu Paidanna  Sons AIR 1942 FC 33
Mr Raja Ram Agarwala learned counsel for the appellantassessees contended before us that it is neces sary to find out or identify the taxable event
If on a true and proper construction of the amended provisions of section 91b 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 necessi tated 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 2ff 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 deal ers 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 var ious 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 wef April 1 1960
Sec tion 2ff 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 manufac tured 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 91b Mr Tewatia emphasised that the contingency contemplated by or despatches the manufac tured 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 51 of the  or as well as clause c of section 91 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 notified under Section 15 have to be judged for determining their validity in the true historical perspective as well as bearing in mind the remedial aspect of the provisions for the purpose of which these were enact ed
Therefore the main question is whether the tax envis aged by section 91 is a tax on purchasesale of given goods or is a tax on the despatch consignment of such goods and that depends on as to whether the taxable event is a purchasesale of goods or despatchconsignment of such goods
As mentioned hereinbefore Mr Tewatia laid great deal of emphasis on the background of the provisions of section 91
He urged that the said section is both a taxing as well as a remedial provision as would be evident from the scheme of the Act
The legislative policy was to see that all goods except non taxable goods ie Schedule B  goods must yield taxrevenue to the State in the hands of a dealer at one stage or the other according to Mr Tewatia
He analysed the scheme and referred us to section 6 along with section 27 of the Act and then submitted that the provision of section 91 along with subsection 3 of section 24 of the Act are both composite provisions ie they are both charging provisions as also remedial provi sions
According to him such composite provisions of a fiscal Statute deserve to be interpreted properly and in such a manner as to further remedy and thus effectuate the legislative intent and suppress the mischief intended to be curbed
Reliance was placed by the High Court as well as Mr Tewatia before us on the observations of this Court in The State of Tamil Nadu vs Kandaswami supra where at p 198 of the Sales Tax Cases this Court while dealing with sec tion 7A of the Tamil Nadu Amendment Act observed that it was at once a charging as well as a remedial provision
Its main object was to plug leakage and prevent evasion of tax
In interpreting such a provision a construction which would defeat its purpose and in effect obliterate it from the statute book should be eschewed
If more than one construc tion is possible that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile observed this Court in that case
While bearing the aforesaid principle in mind it has to be exam ined as to how far the application of this provision can be construed with the well settled principle of fiscal legisla tion and the terms and conditions of the present legisla tion
It has been said and said on numerous occasions that fiscal laws must be strictly construed words must say what these mean nothing should be presumed or implied these must say so
The true test must always be the language used
537 On behalf of the assessee Mr Rajaram Agarwala howev er further contended that the ratio of Kandaswami s case supra to which Mr Tewatia referred must be understood in the light of the question involved in that case
The said decision of this Court was concerned with the limited point as to whether the Madras High Court was right in observing whether one could say that the sale which is exempted is liable to tax and then assume that because of exemption the tax is not payable
This Court held that the language of section 7A of the said Act was far from clear as to its intention and did not concern with the identification of the taxing event
Furthermore it has to be borne in mind as emphasised by Mr Agarwala that if at all the taxing event was spelt out it was on the assumption that the goods in question were generally taxable and these were to be put to tax under section 7A of the Tamil Nadu Act if these came to be purchased without payment of tax and then sought to be dealt with in any manner as to escape payment of State salespurchase tax within the State
Mr Tewatia drew our attention to the observations of this Court in Kandaswami s case supra to prove that the observations in Malabar Fruit Products Co vs The Sales Tax Officer Palai 30 STC 537 where these questions were decided by Justice Poti of the Kerala High Court who spelt out that the taxing event was not the event of despatch but the event of purchasesale of goods
It has however to be borne in mind that the questions involved in Malabar Fruit Products  case and Kandaswami s case supra were not con cerned with the actual argument with which we are concerned in the instant matter
It is well settled that a precedent is an authority only for what it actually decides and not for what may remotely or even logically follows from it
See Quinn vs Leathem  and The State of Orissa vs Sudhansu Sekhar Misra  Ors  Therefore the ratio of the said decision cannot be properly applied in construing the provisions of section 91b in this case to determine what is the taxable event
It was contended by Mr Rajaram Agarwala that clause b of Section 91 dealt with non exempted goods purchased in the State used in the manufacture of any goods whether exempted or not but when despatched outside the State of Haryana ie by way of stock transfer consignment will attract the tax liability under this section hence the event of despatch or consignment is the immediate cause which attracts the tax liability under section 9
The quali ty or the character of goods which should be liable to tax under section 9 in clause 1a is the non exempted goods purchased in the State while 538 under the first part of clause b the quality of goods liable to tax is the non exempted goods purchased in the State and under the second part of clause b the quality of goods must be non exempted goods purchased and manufac tured in the State whether exempted or not in the State which is liable to tax on despatch outside Haryana and under clause c the goods purchased in Haryana without undergoing any further change or use is the quality of goods liable to tax when exported
The submission of the State is that the taxable event is the purchase of goods in Haryana while the obligation to pay is postponed on the fulfilment of certain conditions
The further argument is that there is a general liability to purchase tax which the dealer avoids on furnishing a Decla ration in ST Form 15 as provided by section 24 at the time of purchase wherein certain conditions are mentioned and when those conditions are not fulfilled those revive
It was further argued that the conditions are incorporated in section 9 of the Act
For testing which of the contentions are nearer to find out the exact taxable event certain indicias and illustrations may be seen
Their analysis will indicate that there is no liability to pay sales tax under the Haryana Act on the purchaser
It is admitted that on such sales the selling dealer is liable to pay sales tax
On such purchases the sale and purchase being the two sides of the same coin no purchase tax is imposed under the Act
This has been the accepted position by the State also for while replying to the question of double taxation counsel for the State admitted that sales as well as purchase tax is to be imposeable under the scheme of the Act which are of two sides
Hence it was rightly urged by Mr Rajaram Agar wala that the first contention for attracting the applica bility of section 9i whether a dealer is liable to pay tax under this Act purchases goods is missing when the section 1 talks of a dealer liable to pay tax under the Act obviously it is with reference to his purchasing activ ity and if on that activity no purchase tax is payable section 91 would not be applicable
To accept the submissions advanced by Mr Tewatia assumptions and presumptions are to be made
It is not permissible to do so in a fiscal provision
See in this connection the observations of this Court in CSTUP vs The Modi Sugar Mills Ltd  and Baidyanath Ayurved Bhawan P Ltd Jhansi vs Excise Commissioner UP  Ors
  at 592
In that background it must be noted that section 9 of the Act nowhere makes a reference to section 24 or any declaration furnished by the purchasing dealer on the basis of which he was granted temporary exemp tion and thereby revival of 539 the original purchase tax on the breach of declaration as such
Section 9 of the Act opens with the expression where a dealer liable to pay tax under this Act and not whether a dealer has paid tax or has not paid tax
The phrase liable to pay tax  under the Act must relate to liability to pay sales tax on such purchases
It is well settled that the main test for determining the taxable event is that on the happening of which the charge is affixed
The realisation often is postponed to further date
The quantification of the levy and the recov ery of tax is also postponed in some cases
It is well settled that 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 assessment
Liability 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
Reference may be made to the observations of Lord Dunedin in Whitney vs Commissioner of Inland Revenue at p 52 and of the Federal Court in Chatturam  Ors
vs CIT Bihar 15 ITR FC 302 at 308
Taxable event is that which on its occurrence creates or attracts the liability to tax
Such liability does not exist or accrue at any earlier or later point of time
The identi fication of the subject matter of a tax is to be found in the charging section
In this connection one has to analyse the provisions of section 92b as well as section 91b and 91c
Analysing the section it appears to us that the two conditions specified before the event of despatch outside the State as mentioned in section 91b 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 91b 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 sec tion 91b
The focal point in the expression goods the sale or purchase of which is liable to tax under the Act is the character and class of goods in relation to exigibil ity
In this connection reference may be made to the obser vations of this Court in Andhra Sugars Ltd vs State of Andhra Pradesh  On a clear analysis of the said section it appears that section 91b has to be judged as and when liability accrues under that section
The liability to pay tax under this section does not accrue on purchasing the goods simpliciter but only when these are despatched or consigned out of 540 the State of Haryana
In all these cases it is necessary to find out the true nature of the tax
Analysing the section if one looks to the alleged purchase tax under section 9 one gets the conclusion that the section itself does not provide for imposition of the purchase tax on the transac tion 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 to draw a familiar analogy it is the last straw on the camel s back
In this connection reference may be made to the obser vations of Justice Vivian Bose in The Tata Iron  Steel Co Ltd vs The State of Bihar  at 1381 where he observed as follows I would therefore reject the nexus theory in so far as it means that any one sale can have existence and entity simultaneously in many different places
The States may tax the sale but may not disintegrate it and under the guise of taxing the sale in truth and in fact tax its various elements one its head and one its tail one its entrails and one its limbs by a legislative fiction that deems that the whole is within its claws simply because after tearing it apart it finds a hand or a foot or a heart or a liver still quivering in its grasp
Nexus of course there must be but nexus of the entire entity that is called a sale wherever it is deemed to be situate
Fiction again
Of course it is fiction but it is a fiction as to situs imposed by the Constitution Act and by the Supreme Court that speaks for it in these matters and only one fiction not a dozen little ones
 It is therefore necessary in all cases to find out what is the essence of the duty which is attracted
A taxa ble event is that which is closely related to imposition
In the instant section there is such close relationship only with despatch
Therefore 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 trans action is completely eclipsed or ceases to exist when the levy is imposed at the third stage of despatch of manufac ture
In the instant case the levy has no direct connection with the transaction of purchase of raw materials it has only a remote connection of lineage
It may be indirectly and very 541 remotely connected with the transaction of the purchase of raw material wherein the present levy would lose its charac ter of purchase tax on the said transaction
Mr Rajaram Agarwala submitted that the measure of tax is with reference to the value of purchased goods in the State of Haryana
As mentioned before reference has been made to the decision of Kandaswami s case supra where this Court dealt with section 7A of the Tamil Nadu Act which was not identical but similar to section 9 of the Act
There at p 196 of the report this Court observed as fol lows 
Difficulty in interpretation has been experienced only with regard to that part of the sub section which relates to ingredients 4  5
The High Court has taken the view that the expression goods the sale or pur chase of which is liable to tax under this Act and the phrase purchases  in circum stances in which no tax is payable under Sections 3 4 or 5 are a contradiction in terms
Ingredients Nos
4  5 are as follows 4
The goods purchased are goods the sale or purchase of which is liable to tax under this Act
Such purchase is in circumstances in which no tax is payable under sections 3 4 or 5 as the case may be The relevant ingredient involved as mentioned at page No 196 was as under 6
The dealer either a consumes such goods in the manufacture of other goods for sale or otherwise or b despatches all such goods in any manner other than by way of sale in the State or c despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter State trade or commerce
 This ingredient was neither argued nor was considered so the 542 passing reference based on the phraseology of the section is not the dictum of Kandaswami s case
Secondly in section 9 in the instant case the raw materials purchased or used in the manufacture of new goods and thereafter those new goods were despatched outside the State of Haryana whereupon the tax was levied
This important factor is wholly missing in Section 7A of the Tamil Nadu Act which was considered in Kandaswami s case
In that decision this Court approved the Kerala High Court s decision in Malabar Fruit Products supra which was confined to the interpretation of the words goods  the sale or purchase under the Act
A deci sion on a question which has not been argued cannot be treated as a precedent
See the observations of this Court in Rajput Ruda Maha  Ors
vs State of Gujarat 1980 2 SCR 353 at 356
The decision of the Division Bench of the Kerala High Court in Yusuf Shabeer  Ors
vs State of Kerala  Ors 32 STC 359 is clearly distinguishable
In Ganesh Prasad Dixit s case supra the question of constitutional validity was not argued
A reference was made by Mr Tewatia to the decision of the High Court in The Coffee Board vs Commissioner of Commercial Taxes  Ors 60 STC 142 and the decision of this Court in Coffee Board Karnataka vs Commis sioner of Commercial Taxes Karnataka 70 STC 162
In these cases the question involved was the acquisition of coffee by the Coffee Board under compulsory acquisition or purchase or sale of goods
That question is entirely different from the question with which we are concerned in these appeals
Prior to 46 the Amendment Entry 54 of List II of the 7th Schedule of the Constitution of India which demarcated the exclusive field of State Legislation read with Article 2463 of the Constitution conferred power on the State Legislature to impose tax on the transactions of sale or purchase of goods
The said Entry read as follows Taxes on the sale or purchase of goods other than Newspapers subject to the provisions of Entry 92 A of List I
Entry 92A of List I which is in the exclusive domain of the Union was to the following extent Taxes on the sale or purchase of goods other than Newspapers where such sale or purchase takes place in the course of inter State trade or commerce 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 543 disposal of the goods as such
The consignment or despatch of goods is neither a sale nor a purchase
The first judg ment in case of Goodyear India was on December 4 1982 when it was held that the Notification was beyond the Act as the word disposal  did not include the word mere despatch  as mentioned in the notification
The Constitution 46th Amend ment Act 1982 came into force on February 2 1983 whereby section 9 was amended
This amendment was after 46th Consti tutional Amendment Act 1982
The 46th Constitution Amend ment Act in the Statement of Objects  Reasons inter alia stated as follows There were reports from State Government to whom revenues from sales tax have been as signed as to the large scale avoidance of Central Sales Tax leviable on inter State sales of goods through the device of consign ment of goods from one State to another and as to the leakage of local Sales Tax in works contracts hire purchase transactions lease of films etc
Though Parliament could levy a tax on these transactions as tax on sales has all along been treated as an item of revenue to be assigned to the States in regard to these transactions which are semble sales also it is considered that the same policy should be adopted
 The Law Commission of India in its 61st Report made as indicated before certain recommendations and noticed that the provisions of existing were insuf ficient to tax the consignment transfers from branch to another as it was beyond the concept of sale and its recommendations are contained in paragraph 223 of Chapter II at page 66 it recommended that the definition of sale in the  after carrying out the requi site Constitution Amendment be amended somewhat on the lines indicated by them in their report
The Union of India in part accepted the recommendations but instead of amending the definition of sales in  inserted a new Entry in the Union List in the shape of Entry 92B and also inserted a new sub clause 4 after subclause g in article 269 1 of the Constitution
The Parliament also amend ed clause 3 of Article 269
It appears to us that the effect of the aforesaid amend ment is that the field of taxation on the consignmentdes patch of goods in the course of inter State trade or com merce expressly come within the purview of the legislative competence of the Parliament
It is wellsettled that the nomenclature of the Act is not conclusive and for 544 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
See the observations of Governor General in Council vs Province of Madras 1945 72 IA 91
There Lord Simonds observed as follows   
For in a Federal Constitution in which there is a division of legislative powers between Central and provincial legisla tures it appears to be inevitable that contro versy should arise Whether one or other legislature is not exceeding its own and encroaching on the others Constitutional Legislative Power and in such a controversy it is a principle which their Lordships do not hesitate to apply in the present case that it is not the name of the tax but its real nature it is pith and substance as it has some times been said which must determine into what category it fails
 We must therefore look not to the form but to the substance of the levy
See the observations of the Federal Court in Ralla Ram vs The Province of East Punjab AIR 1949 FC 81
Therefore the nomenclature given by the Haryana Legis lature is not decisive
One has to find out whether in pith and substance a consignment tax is sought to be imposed a tax on despatch in the course of inter State trade or com merce
I have no hesitation in holding that it is a tax on despatch
Inter state trade or commerce it has been empha sised is of great national importance and is vital to the federal structure of our country
As the imposition of consignment tax requires very deep consideration of all its aspects and certain amount of consensus among the States concerned especially with regard to the rates grant of exemption and ratio relating to distribution of proceeds amongst the States inter se the actual imposition of tax is bound to take some time till an agreeable solution is found but that would not make the consignment tax to be in sus pended animation in the State and make us hold that a tax which is in essence a tax on consignment should be taxed by the States by the plea either that otherwise there is ample scope of evasion and further States are without much re sources in these days when there is such a tremendous demand on the revenue of the States
It is well settled that the Entries in the Constitution only demarcate the legislative fields of the respective legislatures and do 545 not confer legislative powers as such
The tax on despatch of goods outside the territory of the State certainly is in the course of inter State trade or commerce and in other words amounts to imposition of consignment tax and hence the latter part of section 91b is ultra vires and void
In these cases we are concerned with the validity of the latter part of section 91b of the Haryana Act which imposes a tax on despatch of manufactured goods outside the territories of Haryana
If it is accepted that section 91b is ultra vires the penalty proceedings would auto matically go as they are in substance based on the viola tion of section 91b of the Act and the consequent pro ceedings flowing therefrom
It is in that context that in writ petition No 3834 of 1985 Mr Soli Sorabjee urged that the attempt and action of the State in imposing tax and attempt to penalise are bad
In this connection it may be mentioned that before the Full Bench of the Punjab  Haryana High Court on behalf of the State a statement was made which has been recorded in 58 STC 393 at p 408 as follows Counsel appearing for the State of Haryana made a statement that if the Full Bench held that Bata India Limited s case 198354 STC 226 did not lay down the correct law and the amendment effected by Act No 11 of 1984 to Section 9 was intra vires then the provision of sub section 3 of section 24 regarding the rate of tax shall not be enforced and only the old rate will be leviable
 In view of the aforesaid statement no higher rate except the old rate admissible factually would be applica ble
Section 243 was introduced by the Haryana Act with retrospective effect from May 27 1971 which is as follows Notwithstanding any other provisions of this Act or any Judgment decree or order of any Court or other authority to the contrary if a dealer who purchases goods without payment of tax under Sub section 1 and fails to use the goods so purchased for the purpose specified therein he shall be liable to pay tax on the purchase value of such goods at the rates notified under Section 15 without prejudice to the provisions of Section 50 provided that the tax 546 shall not be levied where tax is payable on such goods under any other provision of this Act
 This provision without making any change in the substan tive provision purports to give a direction to ignore the judgment in other words purports to overrule the judg ments namely Goodyear and Bata India which is beyond the legislative competence of the State Legislature and this provision is void in view of the decision of this Court
See Shri Prithvi Cotton Mills Ltd vs Broach Borough Municipali ty 1969 2 SCC 283 at 286
For the same reason applying the main section instead of section 91 section 24 should also fail as amended
Civil appeal No 15 1584 is also liable to be dismissed in view of the judgment of this Court in Dy
Commissioner of Sales Tax Law Board of Revenue Taxes vs Ms Thomas Stephen  Co Ltd Quilon   where this Court observed that disposal means transfer of title in the goods to any other person and therefore it would not include mere despatch to own self or to its agents or to its branch offices or depots
In the premises the decision of the Punjab  Haryana High Court in Goodyear India Ltd 53 STC 163 is correct on merits as well
In the aforesaid view of the matter it cannot be held that section 91 and sub section 3 of section 24 are constitutionally valid
In civil appeals Nos 1633 NT of 1985 and 303386 which are the appeals by the Food Corporation of India Mr Sen submitted that the FCI is a service agency of the Govt
of India and is discharging the statutory functions of distribution of foodgrains by procuringpurchasing from the surplus States and despatching the same to the deficit States in accordance with the policy of the Govt
of India
He further submitted that the Corporation procures food grains from the farmers through commission agents in the Mandis of Haryana and despatch them to its own branches in the deficit States of the country
The Corporation branches in the recipient States supply these stocks to the State agenciesfair price shops and also pay tax as per the provi sions of the Sales Tax law of the respective States
Some of the stocks are distributed within Haryana for the Public Distribution System PDS for which sales tax is charged and deposited with the Sales Tax depot as per the provisions of the Haryana General Sales Tax Act
In case the stocks are also sold in the course of inter State trade or commerce central sales tax is levied and deposited with the Haryana Sales Tax authorities
Some of the grains are also exported out of India on which there is exemption on payment of any tax
547 In fact the points at which the tax is to be levied have been indicated in Schedule D  to the Act
It is clear from the perusal of the Schedule that in case of Paddy the taxable event is the last purchase
Similarly in case of rice the taxable event is the first sale point in the State
In case of wheat and other cereals the point of taxation is the last sale to the consumer by a dealer liable to pay tax under the Act
In respect of inter State despatch of wheat and other foodgrains by FCI to its own branches tax is attracted at the time of despatch under section 91c of the Haryana Act
Section 9 is therefore 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
Incidentally export has been defined in section 2e of the Act which reads as follows 2e export means the taking out of goods from the State to any place outside it other wise than by way of sale in the course of inter State trade or commerce or in the course of export out of the territory of India 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
No tax is therefore payable in regard to export outside India but the tax is payable for sale in the course of inter State trade and commerce ie under the 
It is only when the goods are despatchedconsigned 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
On perusal of sections 14  15 of the  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
The appeals of
the FCI are confined to section 91c which insofar as it purports to tax export is beyond the legisla tive competence of the State of Haryana
On behalf of the State in Bata Co Ltd vs State of Haryana supra the submission of the State was on the basis that it had power to tax consignment or despatches of goods
But after the 46th Amend 548 ment the State Legislature is incompetent to legislate about consignmentsdespatches otherwise than by way of sale under which no purchasesales tax is leviable under the Haryana Act
It is the Parliament alone which is legisla tively competent to enact a legislation on consignment
Now it is necessary to deal with civil appeals Nos 4 162 6385 which deal with the validity of section 13 AA of the Bombay Sales Tax Act
These appeals are by Hindustan Lever Ltd and Wipro Products the appellants herein
The appellants at all material times manufacture make and deal in vanaspati soaps etc chemicals and agro chemicals and they used to purchase various types of VNE oils for their manufacture of vanaspati soaps and other products
Since the appellants had a wide net of distribution of their products all over India they appointed 40 and more clearing and forwarding agents in the country
The appellant used to despatch the goods so manufactured from their factory to the clearing and forwarding agents
They also used to purchase VNE oils and other raw materials and paid 4 tax by way of purchase tax under section 3 of the Bombay Sales Tax Act 1959 hereinaf ter called the Bombay Act 
The raw materials are used in the manufacture of said goods and as the said manufactured goods are despatched outside the State to the several dis tributing agencies the appellant companies were held to be liable to pay under section 13 AA of the Act an additional tax  2 on purchase of the said goods
The question therefore that arises is whether the levy of additional tax at 2 under Section 13 AA of the Act is a tax on purchases failing under Entry 54 of List II of the 7th Schedule or it is a tax on the despatch of consign ment of the manufactured goods outside the State
In case of latter the State Legislature will have no power to impose any tax on such consignment or despatch of goods outside the State
If it is the former then it will be valid
The question is that under the true constructions of section 13 AA of the Act on which the imposition of tax is made or in other words what is the incidence of that taxation or taxable event In both these appeals namely civil appeals No 4162 88 and 416388 the appellants Ms Wipro Products Ltd and Hindustan Lever Ltd are contending that the levy is bad
The issue involved in both the appeals is the con stitutional validity and legality of the provisions of section 13 AA of the Act which was introduced into the Act by the Maharashtra Act XXVIII of 1982
The appellant 549 had a factory at Amalnar in Jalgaon district in the State of Maharashtra wherein it uses non essential oil purchased by it for the manufacture and transport
The finished products namely vanaspati manufactured by the appellant used to be despatched to their various marketing depots in the State of Maharashtra Madhya Pradesh Karnataka Andhra Pradesh UP Tamil Nadu and Kerala etc
On July 1 1981 the rate of purchase tax payable on VNE oils falling under Schedule C part I at Entry 35 purchased within the State of Maharash tra from non registered dealers increased from 3 to 4 by the Maharashtra Act 32 of 1981
Section 13 AA was introduced into the Act providing for levy of 2 additional purchase tax on the purchase of goods input goods specified in part I of the Schedule from a non registered dealer if such goods were used in the manu facture of taxable goods within Maharashtra and thereafter the manufactured goods were transferred outside Maharashtra in the manner indicated in the said section
The appellants filed writ petitions
An order was passed by the Bombay High Court on July 19 1988 in respect of these two writ petitions by the Wipro Products as well as Hindustan Lever Ltd The decision of the High Court is reported in 1989 72 STC 69
Dismissing the petitions of the appellants the High Court held that i three different phases are contemplated in section 13 AA of the Act namely the initial purchase of the raw material the consumption thereof in the manufacture of taxable goods and the despatch of the manufactured goods outside the State
If the goods purchased remain in the same form within the State the question of levying additional tax would not arise
The High Court came to the conclusion that there was no ground to hold that the additional tax was levied on the despatch of goods and was unconnected with the initial transaction of purchase as it was required to be paid in addition to the sales or purchase tax paid or pay able in respect of the same goods which had been so pur chased before the conditions specified in section 13 AA are fulfilled ii in the context of the other provisions of the Act a sort of concession is given at the time of pur chase on the quantum of tax payable on the purchase of goods which fall under Part I of Schedule C
However there is a clear mandate of law which is clearly understood between seller and buyer that though tax at the concessional rate is paid the obligation to pay the additional tax on the happening of certain events namely use of such goods in manufacture of finished goods and despatch of finished goods outside the State is undertaken 550 by the purchaser and iii implicit in the low rates of tax prescribed on raw material attributable to goods in Part I of Schedule C is the condition precedent that to avail of this concession the goods in question are required to be sold in the State after being used in the manufacture of other taxable goods
The High Court further was of the opinion that a manufacturer who purchases raw material at a concessional rate on the strength of declaration in Form 15 cannot transfer the goods manufactured out of such raw material outside the State
The High Court held that if he does so he is liable to pay purchase tax at the full rate on the raw material under section 14
According to the High Court similarly a manufacturer who purchases goods covered in Part III of Schedule C uses them in the manufacture of other taxable goods which he despatches outside the State is liable to pay tax at rates ranging from 6 to 15
Sec tion 13 AA therefore far from being discriminatory serves to wipe out any discrimination between the two categories of manufacturers mentioned above and manufacturers purchasing raw material covered by Part I of Schedule C according to the revenue
The High Court was of the opinion that the additional purchase tax leviable under section 13 AA of the Bombay Act is on the purchase value of VNE oil used in the manufacture of goods transferred outside the State and not on the value of the manufactured goods so transferred
It further held that the tax levied under section 13 AA of the Bombay Act falls squarely and exclusively under Entry 54 of the State List in the 7th Schedule to the Constitution of India and the State Legislature was competent to levy it
It does not even remotely fall under Entry 92B of the Union List according to the High Court
The High Court was also of the view that the goods taxed under section 13 AA of the Bombay Act are consumed in the State as raw material in the process of producing other commodities
Hence there was no question of any hindrance to a free flow of trade bringing into operation Article 301 of the Constitution
According to the High Court the peti tioners had not brought forth any material to show how the free flow of trade has been affected by this additional rate of tax and held that section 13AA is not violative of Article 14 of the Constitution and that section 13AA of the Bombay Act and the orders requiring the appellants to pay additional tax  2 on purchase of VNE oil used by them as raw material in the manufacture of goods despatched outside the State were valid
The High Court in the judgment under appeal has set out the relevant provisions of the Act which was enacted to consolidate and 551 amend the law relating to levy of tax on the sale or pur chase of certain goods in the State of Bombay
Section 2 contains some of the definitions
Section 24 deals with authorisations of turnover etc
Section 13AA of the Bombay Act with which the High Court and these appeals are con cerned is in the following terms 13 AA
Purchase tax payable on goods in Schedule C Part I when manufactured goods are transferred to outside branches
Where a dealer who is liable to pay tax under this Act purchases any goods speci fied in Part I of Schedule C directly or through Commission agent from a person who is or is not a Registered dealer and uses such goods in the manufacture of taxable goods and despatches the goods so manufactured to his own place of business or to his agent s place of business situated outside the State within India then such dealer shall be liable to pay in addition to the sales tax paid or payable or as the case may be the purchase tax levied or leviable under the other provi sions of this Act in respect of purchases of such goods a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture and accordingly the dealer shall include purchase price of such goods in his turnover of pur chases in his return under section 32 which he is to furnish next thereafter
 The questions involved in these appeals are whether section 13AA of the Bombay Act is beyond the legislative competence of the State Legislature and it is violative of Article 14 of the Constitution and thirdly whether the said provision is violative of Article 301 of the Constitu tion
It was contended on behalf of the appeallant that section 13AA of the Act is a charging section and imposes a charge of an additional rate of 2 in the rupee if the following conditions laid down therein are satisfied i the charge is levied upon a dealer who is liable to pay tax under the Act ii such a dealer purchases any goods speci fied in Part I of Schedule C directly or through commission agent from a person who is or is not a registered dealer iii the goods so purchased are used in the manufacture of taxable goods and iv the goods which are so manufactured and not the goods on which purchase tax had been paid are despatched to the dealer s own place of business or to his agent s place of business situated outside the State
552 According to the appellant the said section lays down the person who is liable to pay tax the goods on which the same is leviable and the taxable event which would attract the liability of additional tax of two paise in the rupee namely the despatch or consignment of goods by the dealermanufacturer outside the State
According to Dr Pal counsel for the appellant the taxable event is not the purchase of goods as such which is the raw material but it is the despatch or consignment of goods manufactured by the dealermanufacturer to its own branch outside the state and that thus manufactured goods are different from commercial commodity distinct and sepa rate from the raw materials on which purchase tax has al ready been paid
It is well settled it was reiterated beforeus that in case of excise duty the taxable event is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof
In case of sales tax taxable event is the sale of goods
Hence though both excise duty and sales tax are levied with reference to the goods the two are different imposts in one case the impo sition is on the act of manufacture or production while in case of other the imposition is on the act of sale
But in neither case the impost is a tax directly on the goods
See in this connection the observations of this Court in re The Bill to amend section 20 of the and section 3 of the Central Excises  Salt Act 1944  at 821 and Ms Guruswarny  Co vs State of Mysore  at 562
The power to tax the sale or purchase of goods is dif ferent from the right to impose taxes on use or consumption
According to Dr Pal such power to levy sales tax cannot be exercised at the earlier stage of import or manufactureproduction nor the said power can be exercised at the later stage of use or consumption but only at the stage of sale or purchase
In respect of sales tax the right to levy duty would not at all come into being before the time of salepurchase
Sales tax cannot be imposed unless the goods are actually sold and may not be leviable if there is a transfer in some other form
See in this connection the observations of the Federal Court in Mukunda Murari Chakravarti  Ors
vs Pabitramoy Ghosh  Ors at 22
Therefore in this case it is necessary to ascertain what is the taxable event under section 13 AA of the Act which attracts duty
A taxing event is that event the occurrence of which immediately attracts the levy or the charge of tax
In the fiscal legislations normally a charge is created
The mischief of taxation occurs on the happening of the taxable event
Diffe 553 rent taxes have different taxable events
In the instant case Dr Pal canvassed before us that the incidence of the levy of additional tax of two paise in the rupee is not on the purchase of goods but such a levy is attracted only when a the goods which so purchased on payment of pur chase 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 out side the State
Therefore the incidence of tax is attracted not merely on the purchase but only when the goods so pur chased arc used in the manufacture of taxable goods and are despatched outside the State
In our opinion it was rightly submitted that it is the effect of section 13AA of the Act
It was further highlighted by Dr Pal on behalf of the assessee that additional tax is not levied on the goods purchased on payment of purchase tax and despatched outside the State
The goods which are purchased on payment of purchase tax are used in the manufacture of taxable goods
What is despatched is not the raw material which have been purchased on payment of purchase tax but a completely dif ferent commodity namely vanaspati and soap
If the raw materials as such purchased on payment of purchase tax are despatched outside the State the additional tax under section 13 AA of the Act is not attracted
Hence the inci dence of additional tax has no nexus with the purchase of the raw materials as was contended by Mr SK Dholakia appearing for the State and as held by the High Court
Purchase tax under section 3 of the Act is attracted when the taxable event ie 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
Dr Pal drew our attention to some of the observations of this Court in Kedarnath Jute Mfg Co Ltd vs Commissioner of Income tax Central Calcutta 82 ITR SC 363 and State of Madhya Pradesh  Ors
vs Shyama Charan Shukla 29 STC SC 215 at 218 219
On the other hand Mr Dholakia submitted that the submission of the appellant proceeded on the assumption that the liability to pay is the same as the obligation to pay but this was wrong
These two are different
It was submitted that the obligation to pay is not the same thing as liability to tax and that it was wrong to proceed on the basis that because obligation to pay  is a later event the despatch of goods  is the taxa ble event
This is a fallacy according to Mr Dholakia
In this connection reliance was placed on the observations of this Court in RC Jail vs Union of India 1962 Suppl
3 SCR 436 where this Court reiterated that subject always to the legislative com 554 petence of the enacting authority the tax can be levied at a convenient stage so long as the character of the impost is not lost
The method of collection does not affect the essence of the machinery of collection for administrative convenience
Reliance was also placed on the observations of Union of India vs Bombay Tyre International Ltd  It was submitted by Mr Dholakia that the correct ap proach is to first determine whether the State Legislature having regard to Entry 54 of List II to the 7th Schedule to the Constitution can levy tax on purchase of a class of goods which class is to be identified by reference to the condition of use of such goods into other taxable goods and despatch of such taxable goods outside the State
He submit ted that if it is accepted that the State could have the power to tax purchases of goods meant for use into manufac ture of other taxable goods and despatch outside thereafter then next question is whether the State enactment like section 13AA of the Bombay Act is so formulated as to come within the framework described
He admitted that even if it did it would still have to be subject to a the doctrine of pith and substance b the fundamental rights and c Article 301
According to Mr Dholakia the Act contains a charging section which is section 3
It levies tax on turnover of sales and purchases within section 236 and 235 respec tively of the said Act
Section 13 of the Act levies tax on purchases in accordance with rates prescribed in Schedule C if the goods are purchased from an unregistered dealer
Section 13A levies a concessional tax on purchases if the goods are purchased from a registered dealer provided a declaration in the prescribed form is given under section 12b of the Act if the purchaser buys directly or one under section 12d if the purchaser buys through a commis sion agent
In both the forms the relevant conditions are a that the goods fall within Part ii of Schedule C and b that the goods bought would be used for manufacture of other taxable goods within the State and sold within the State
Mr Dholakia submitted that on giving the aforesaid declaration the purchaser would have to pay only 4 tax
The rates prescribed in Schedule C are as under Schedule C  Part Minimum Rate Maximum Rate I 2 4 II 6 15 555 The effect of section 13A without section 13 AA accord ing to Mr Dholakia was that only those who bought goods which fell into Part II would have benefitted by the decla ration since the rate mentioned in section 13A was 4
Hence those buying goods falling within Part I of Schedule C had not to give any declaration under section 12b or 12d as the case may be and still manufacture the taxable goods and despatch them outside the State
According to him as a result of this situation two results emerged ie i the State lost revenue because the goods manufactured with the help of the infrastructure provided by the State escaped further tax by goods being resold outside the State and ii the purchasers of raw materials used by the manufactur ers for producing new taxable goods were not being treated equitably because those whose purchases of goods which fell into Part II had to give a declaration to get the benefit of reduced rate
On the other hand those whose purchases of goods fell in Part I need not give such a declaration
According to him from the standpoint of the object of encouraging resale within the State the classification in form of Part I and II had no rational nexus
Therefore that construction should be made which may make section 13 AA of the Act to avoid this mischief
According to Mr Dholakia section 13AA speaks of the requirement of additional purchase tax from those who have paid purchase tax if the object of the purchases is to use the goods falling in Part I of Schedule C for manufacture of taxable goods and the despatch of such goods outside the State
He alleged it to be a fair and reasonable construc tion and it will subserve the purpose of the amendment
It is well settled that reasonable construction should be followed and literal construction may be avoided if that defeats the manifest object and purpose of the Act
See Commissioner of Wealth tax Bihar  Orissa vs Kripashankar Dayashankar Worah at 768 and Income tax Commis sioners for city of London vs Gibbs 10 ITR Suppl
121 HL at 132
Mr Dholakia further submitted that the Statement of Objects  Reasons also helps this construction
In our opinion he rightly submitted that because the accounts had to be maintained in a particular manner is no criterion or evidence for determining when the liability arises
The law is that the liability to tax would be determined with refer ence to the interpretation of the Statute which creates it
It cannot be determined by referring to another Statute
As contended by both the sides it is well settled that the doctrine of pith and substance means that if an enactment substantially falls within the powers expressly conferred by the Constitution upon the Legislature 556 which enacted it it cannot be held to be invalid merely because it incidentally encroches upon matters assigned to another Legislature
See Kerala State Electricity Board vs Indian Aluminium Co 1976 SCR 552 and Prafulla Kumar Mukherjee  Ors
vs Bank of Commerce Ltd AIR 1947 PC 60 at 65
Therefore the proper question which one should address to oneself is whether section 13AA is in pith and sub stance not levying tax on purchase but one levying tax on consignment
Depending upon the answer to the question the validity of the action can be judged
Mr Dholakia submitted that the Act is in pith and substance an Act levying tax on purchase and not one levying tax on consignment and re ferred to the observations of this Court in State of Karna taka vs Shri Ranganatha Reddy  According to him the consignment contemplated in section 13 AA is only of manufactured goods and no tax is levied under sec tion 13AA in respect of such manufactured goods
He empha sised as aforesaid
It is well settled that while determin ing 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
One must have regard to such other matters as decided by the Privy Council in Gover nor General in Council vs Province of Madras supra not by the name of tax but to its real nature its pith and sub stance which must determine into what category it fails
See the observations of RR Engineering Co vs Zila Parishad Bareilly  Anr   in re A reference under the Govt
of Ireland Act 1920 at 358 and Navnitlal C Javeri vs KK Sen Appellate Asstt
Commis sioner of Income Tax D  Range Bombay  at 915
On an analysis we find that the goods which are des patched are different products from the goods on the pur chase of which purchase tax was paid
The Maharashtra legis lation has to be viewed in the context of 46th Amendment to the Constitution
The 46th Amendment introduced Article 269 1h which lays down that the proceeds of the tax on consignment of goods whether the consignment is to the person making it or to any other person where such consign ment takes place in the course of inter State trade or commerce will be assigned to the States
The said Amendment also introduced Entry No 92B in List I of the 7th Schedule
The said Amendment was made on the consideration of the 61st Report of the Law Commission
Entry 92B in List I of the 7th Schedule and Article 2691h of the Constitution bring within its sweep the consignment of goods by a person either to himself or to any other person in the course of inter State trade or 557 commerce
Article 2693 gives the power to Parliament to formulate the principles for determining when a consignment of goods takes place in the course of inter State trade or commerce
If Entry 92B in List I is to be given the widest interpretation as it should be it would be clear that the constitutional changes introduced by the 46th Amendment in Article 269 read with the Entry the tax on consignment of goods now comes within the exclusive legislative field of Parliament
The true test to find out what is the pith and substance of the legislation is to ascertain the true intent of the Act which will determine the validity of the Act
If the Parliament in exercise of its plenary power under Entry 92B of List I imposes any tax on the despatch or consignment of goods Parliament will be competent to do so
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
The argument on the construction of the enactment is misconceived
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
If that is so then it is a duty on despatch
In that view of the matter this charge cannot be sustained
As mentioned hereinbefore the section has been chal lenged as being violative of Article 14 of the Constitution
This attack is based on the discrimination between the two types of taxes but in the way we have construed the section in our opinion this question does not survive
It was further submitted by Dr Pal that section 13AA of the Act is violative of Article 301 of the Constitution
It makes a discrimination between the dealermanufacturer who despatch es the goods outside the State and the other dealermanufac turer
Both the dealer manufacturers purchase the goods on payment of purchase tax and use them in the manufacture of taxable goods
The incidence of additional tax on the pur chase of goods is attracted only when such manufactured goods are despatched outside the State
If a dealermanufac turer has to despatch the goods outside the State he has to pay a higher rate of tax and thus he is discriminated as compared to the other dealermanufacturer who purchases the raw material on payment of 4 purchase tax but despatches the raw material straightaway outside the State and uses them in the manufacturer of goods outside the State
The High Court held that there was no violation of Article 301 of the Constitution
Reference was made to the decision of this Court in Atiabari Tea Co Ltd vs The State of Assam  Ors   558 The Automobile Transport Rajasthan Ltd vs The State of Rajasthan 1963 1 SCR 491 Andhra Sugars Ltd vs State of Andhra Pradesh supra State of Madras vs NK Nataraja Mudaliar  and State of Kerala vs AB Abdul Khadir  Ors  One has to determine does the impugned provision amount to restriction directly and immediately on the trade or commerce movement As was observed by this Court in Kalyani Stores vs The State of Orissa  Ors
   imposition of a duty or tax in every case would not tanta mount 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 fall within the prohibition imposed by Article 301
A tax in certain cases may directly and immedi ately restrict or hamper the flow of trade but every impo sition 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 304b does not arise
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 sub stantial hindrance to a free flow of trade
On the evidence adduced we are in agreement with the High Court that the challenge to the imposition in the background of Article 301 cannot be sustained and therefore no question whether such imposition is saved under Article 304b of the Constitution arises
In the aforesaid view of the matter and for the reasons mentioned hereinbefore it must be held that so far as the appeals in respect of the Haryana Act are concerned the High Court was right in the view it took in Goodyear India Ltd s case 53 STC 163 as well as the views expressed by the High Court in Bata India Ltd vs The State of Haryana  Anr 54 STC 226 are correct and are affirmed
The views of the High Court expressed in Des Raj Pushap Kumar Gulati s case supra are incorrect for the reasons mentioned herein before
The last mentioned judgment and the judgment and orders following passed by the Punjab  Haryana High Court are therefore set aside
In the premises Civil Appeals Nos
1166 7285 Ms Goodyear India Ltd vs State of Har yana  Anr Civil Appeal No 1173 77 NT85 Gedore I Pvt Ltd vs State of Haryana  Anr civil appeal No 267486 Ms Kelvinator of India Ltd  Anr
vs State of Haryana  Ors Civil Appeal No 1633 NT85 FCI vs State of Haryana  Anr and 559 Civil Appeal No 3033 NT86 FCI Karnal vs The State of Haryana  Ors are allowed and the judgment and order of the High Court are set aside
Civil Appeals Nos
15 12 NT84 State of Haryana  Anr
vs Gedore Tools P Ltd and 151584 State of Haryana  Anr
vs Goodyear India Ltd  are dismissed
Special leave petitions Nos
8398840283 are dismissed and for the rea sons mentioned hereinbefore civil appeal Nos
416288 Ms Wipro Products Ltd vs State of Maharashtra  Anr
and 416388 Hindustan Lever Ltd  Anr
vs State of Maharashtra  Anr  are allowed and the judgment and order of the High Court passed therein are hereby set aside
In the facts and the circumstances of this case the parties will pay and bear the respective costs
So far as the civil appeals Nos
163385 and 303386 are concerned wherein the appellants are the Food Corpn
of India I allow these appeals and setting aside the judgment of the High Court on the ground that tax on despatch or consignment was not within the competence of the State Legislature
I am however not dealing with or expressing any opinion on the other contentions of the FCI that in view of the nature of its business it was not liable to tax in respect of the sales tax
This contention will be decided in the appropri ate proceedings
So far as the contention regarding penalty under the Haryana Act these proceedings fail because the charging provisions fail
In so far as the penalty proceedings are impugned on other grounds apart from the failure of the charging provisions I am expressing no opinion on these aspects
RANGANATHAN J I agree but wish to add a few words
The question raised in these appeals is a fairly tick lish one
Simply stated Section 9 of the Haryana General Sales Tax Act 1973 as well as section 13AA 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 manu facture of taxable goods and b despatches the goods so manufactured otherwise than by way of sale to a place of business situated outside the State
The legislation howev er is careful to impose the tax only on the price at which the raw materials are purchased and not on the 560 value of the manufactured goods consigned outside the State
The States describe the tax as one levied on the purchase of a class of goods viz those purchased in the State and utilised as raw material in the manufacture of goods which are consigned outside the State otherwise than by way of sale
On the other hand according to the respondentsasses sees this is nothing but a tax on consignment of goods manufactured in the State to places outside the State camouflaged as a purchase tax by quantifying the levy of the tax with reference to the purchase price of the goods purchased in the State and utilised in the manufacture
To me it appeared as plausible to describe the levy as a tax on purchase of goods inside the State which attaches itself only in certain eventualities as to describe it as a tax on goods consigned outside the State but limited to the value of the raw material purchased inside the State and utilised therein
1 therefore had considerable doubts not only during the arguments but even some time thereafter as to whether so long as the tax purports to be a tax on purchases and has a nexus though a little distant with purchase of goods in the State the State Government s competence to impose such a tax should not be upheld
But on deeper thought I am inclined to agree with the conclusion of my learned brother
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 vide Andhra Sugars Ltd  Anr
vs State  and a case like the present where the tax though described as purchase tax actually becomes effective with reference to a totally different class of goods and that too only on the happening of an event which is unrelated to the act of purchase
The taxable event if one might use the expres sion often used in this context is the consignment of the manufactured goods and not the purchase
I also agree with my learned brother that the decision in State of Tamil Nadu vs Kandaswami 1975 36 STC 191 though rendered in the context of an analogous provision does not touch the issue in the present case
The above distinction becomes significant particularly in the background of the constitutional amendments referred to in the judgment of my learned brother
These indicate 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 contention of the assessees that the States unable to tax the exodus directly attempted to do so indirectly by linking the levy ostensibly to the purchases in the State
561 Viewing the impugned statutory provisions from the perspectives indicated above I agree with my learned broth er that the appeals have to be allowed as held by him
TNA Appeals and petitions disposed of


Summary:
The appellant is engaged in the business of manufacture of various pharmaceutical products including sulphamethoxa zole which is also known as SMX 
One of the important ingredients or raw materials for the manufacture of SMX is a chemical known as isoxamine 
On April 23 1974 the Ministry of Industrial Development of the Government of India issued to the appellant an indus trial licence enabling it to manufacture 18 tonnes of SMX per year
Under one of the conditions of the industrial licence the appellant was permitted to import the material isoxamine for a period of two years only from the date of licence and thereafter the product SMX was to be manufac tured from indigenous materials
The appellant s request for permission to import isoxamine till the middle of 1979 was not acceded to by the Government and the appellant was asked to manufacture SMX from indigenous materials
In the mean time the appellant had placed orders for the import of isoxamine under an import licence issued on October 13 1976 and between March and June 1979 got the goods cleared after giving a declaration that the appellant was an Actual User and that its registration had not been cancelled or withdrawn or otherwise made inoperative
496 The Collector of Customs Bombay issued show cause notice on the appellant for confiscation of goods and impo sition of penalty inter alia on the ground that it had made a false statement that its registration had not been cancelled withdrawn or otherwise made inoperative for the manufacture of SMX by using imported material that is isoxamine inasmuch as the industrial licence had ceased to be valid for the manufacture of SMX with imported material after April 22 1976
The Collector of Customs after bearing the appellant held that the appellant was not an Actual User Industrial in respect of the said imported raw material isoxamine after April 22 1976 and that since the industrial licence was invalid for manufacture of SMX with imported material the importation of the raw material namely isoxamine was impermissible
The Collector also held that the appellant had furnished a false declaration on the basis of which it got the goods cleared by the Custom Officer
The Collector therefore set aside the decision of the Custom Officer allowing clearance of the goods
The Collector of Customs further directed confiscation of the goods imported by the appellant and also imposed a penalty
The appellant s writ petition was dismissed by the learned Single Judge of the High Court and appeal against his judgment was dismissed by the Division Bench
Before this Court it was contended on behalf of the appellant that the goods namely isoxamine having been imported under a valid Open General Licence OGL the customs authorities had no jurisdiction to confiscate the same that the appellant having secured the OGL for the import of isoxamine for its own use and not for business or trade in it the appellant should be held to be an Actual User that the Collector of Customs could not in exercise of his revisional jurisdiction under section 1302 of the  as it stood then for the first time confiscate the goods and impose penalty on the appellant and that as the goods have been confiscated and the penalty has been imposed by the Collector of Customs in exercise of his revisional jurisdiction the appellant has been deprived of his right to prefer an appeal before the Central Board of Excise and Customs under Section 128a of the 
While dismissing the appeal this Court HELD 1 There can be no doubt that the definition of Actual User Industrial as contained in clause 3 of paragraph 5 of chapter 2 of Import Policy 1978 79 should be read with the definition of Actual 497 User in clause 1 of paragraph 5
So read it is clear that an Actual User Industrial means an industrial undertaking which is entitled to utilise the imported goods in the manufacturing process or operations conducted within its authorised premises
In other words the importer must not be debarred from utilising the imported goods under the terms of the industrial licence
504C D 2 The declaration of the appellant that it is an Actual User and that its registration has not been other wise made inoperative is a false declaration as rightly held by the Collector of Customs
When the industrial li cence granted to the appellant does not permit the use of the imported goods for the manufacture of SMX the importa tion of the goods under the OGL is illegal and could not be allowed to be cleared by the appellant
505A B 3 In view of the provisions of section 122 read with section 124 of the  the Collector of Customs has the jurisdiction to confiscate goods or impose penalty after issuing show cause notice
He has therefore both the original jurisdiction as also revisional jurisdiction
In exercise of his revisional jurisdiction under section 1302 of the Act he set aside the order of the Customs Officer allowing the goods to be cleared by the appellant and thereafter in exercise of his original jurisdiction under section 122 read with section 124 of the Act he issued a show cause notice on the appellant and after hearing the appellant confiscated the goods and imposed penalty on the appellant
506E F 4 It appears however that the confiscation was made and the penalties imposed by the Collector of Customs in exercise of his revisional power under section 1302 of the act
This is a mere irregularity not affecting the order
When an authority has the power to do a certain act and in exercise of such power he does the same but refers to a wrong provision of the law that would be a mere irregulari ty and would not vitiate such act
506G H 507A Addl
Commissioner of Income Tax vs JK D Costa  distinguished
5 In the order of the Collector it has been specifi cally stated at the very outset that an appeal against the order lies to the Central Board of Excise and Customs
It cannot therefore be said that the appellant was misled as the order was purported to have been passed by the Collector of Customs in exercise of his revisional jurisdiction 498