Special Leave Petition Civil Nos
16041 4288
From the Judgment and Order dated 2771988 of the Karnataka High Court in WP
No 917386 and WA
No 270785
WITH SLP C Nos 12258 12254 1226090  860891 RN Narasimhamurthy SS Javali SN Bhat and Ravi P Wadhwani for the Petitioners
MS Nesargi R Jagannath Goulay MK Dua M Veerappa KH Nobin Singh SK Kulkarni and Surya Kant for the Respondents
The following Order of the Court was delivered by K JAYACHANDRA REDDY J
In all these special leave petitions the common question that arises for consideration is whether the provisions of the Karnataka Land Reforms Act 1961 as amended in 1974 Act  for short cease to be applicable in all respects to the lands which came within the purview of the Urban Land Ceiling and Regulation Act 1976  Ceiling Act  for short
The lands involved in these matters are covered by the development plan by the Belgaum City Town Planning authority as per the Master Plan for the said City and they are included and declared as urban agglomeration in the City of Hubli under the provisions of the Ceiling Act
In the year 1972 the Karnataka Legislature passed a resolution under Article 252 of the Constitution to the effect that imposing a ceiling on urban immovable property and the acquisition of such property in excess of the ceiling limit for public purposes and all the matters connected therewith shall be regulated in the State by Parliament Qby law
The State Legislature thus divested itself of the legislative competence to enact law in respect of subject matter of the resolution
On 1474 the amended Karnataka Land Reforms Act was enacted and under the said Act the tenant of the land covered by the Act is entitled to the grant of occupancy rights after making an application under the Act
This Act came into force with effect from 2185
But for the purpose of grant of occupancy rights 1474 was the relevant date
While so in the year 1975 the Governor of Karnataka passed the Urban Aggolmeration Ordinance whereunder all lands between the periphery of 8 KMs
of the municipal limits of Hubli Dharwad were declared as urban agglomeration land
In the year 1976 the Parliament passed the Ceiling Act for imposition of ceiling on urban properties and the Act was made applicable to Karnataka also in view of the resolution passed by the State Government referred to above
The order of the Land Tribunal under the Act conferring occupancy rights on the tenants was challenged before the High Court contending that the lands involved in these cases were within the purview of the Ceiling Act and therefore the provisions of the Land Reforms Act had no application to such lands on the ground that the provisions of the State Act were repugnant to the provisions of the Central Act namely the Ceiling Act
The writ petition was dismissed by the High Court
The owners preferred writ appeals and they were also dismissed by a common judgment in Writ Appeal Nos 2707 and 236185 etc
The Division Bench held that there is no conflict between the two enactment in certain respect ie atleast so far as the implementation of the provisions of Chapter III of the Act are concerned and that provisions of this Chapter of the Act do not cease to apply to the agricultural lands coming within the meaning of urban agglomeration in the Ceiling Act
The judgment of the Division Bench is challenged in SLPCivil No 16041 4288
Many of the similar writ petitions that were pending before the High Court were transferred to the Land Reforms Appellate Tribunal
The Appellate Tribunal dismissed the petitions by a common order following the judgment of the Division Bench of the High Court in Writ Appeal No270785 and connected matters
Several civil revisions petitions filed by the land owners against the order of the Appellate Tribunal were dismissed by the High Court
Some of the special leave petitions are filed against the order of the High Court in the said civil revision petitions
Therefore all these special leave petitions can be disposed of by a common order
It was urged before us that the resolution of the State Legislature passed under Article 252 of the Constitution shifted the topic covered by the resolution from List II of Schedule VII to the Constitution and vested the competence to make the law in respect of the said topic in the Parliament and that thereafter the State enactment ceased to have efficacy in respect of said topic
Alternatively it was urged that when in pursuance of the resolution the Parliament legislates in respect of the topic covered by the resolution the Parliamentary law repeals or supersedes any existing State legislation on the topic and therefore such law cannot be enforced thereafter
We shall first extract some of the relevant provisions of the Constitution of India and the respective enactments
Article 246 of the Constitution reads thus 246
Subject matter of laws made by Parliament and by the Legislatures of States l Notwithstanding anything in clauses 2 and 3 Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule in this Constitution referred to as the Union List
2 xx xx xx 3 Subject to clauses 1 and 2 the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule in this Constitution referred to as the State List
4xx xx xx  2 Entry 18 in List II namely the State List of the VII Schedule to the Constitution is in the following terms 18
Land that is to say rights in or over land land tenures including the relation of landlord and tenant and the collection of rents transfer and alienation of agricultural land land improvement and agricultural loans colonization
 Article 252 of the Constitution reads thus 252
Power of Parliament to legislate for two or more States by consent and adoption of such legislation by any other State 1 If it appears to the Legislatures of two or more States to be desirable that any of the matters with respect to which Parliament has no power to make laws for the States except as provided in Articles 249 and 250 should be regulated in such States by Parliament by law and if resolutions to that effect are passed by all the Houses of the Legislatures of those States it shall be lawful for Parliament to pass an Act for regulating that matter accordingly and any Act so passed shall apply to such States and to any other State by which it is adopted afterwards by resolution passed in that behalf by the House or where there are two Houses by each of the Houses of the Legislature of that State
2 Any Act so passed by Parliament may be amended or repealed by an Act of Parliament passed or adopted in like manner but shall not as respects any State to which it applics be amended or repcaled by an Act of the Legislature of that State
 Article 252 empowers the Parliament to legislate for two or more States on any of the matters with respect of which the Parliament has no power to make law except as provided under Articles 249 and 250
This power to legislate is vested in the Parliament only if two or more State Legislatures think it desirable to have a law enacted by Parliament on such matters in List II ie with respect to which the Parliament has no power to make law for the State
The passing of the resolutions by the State Legislatures is a condition precedent for vesting the Parliament with such power
The relevant portion of the resolution passed by the State Legislature under Article 252 reads thus Now therefore in pursuance of clause 1 of Article 252 of the Constitution this Assembly hereby resolves that the imposition of a ceiling on urban immovable property and F acquisition of such property in excess of the ceiling and all matters connected therewith or ancillary and incidental thereto should be regulated in the State of Karnataka by Parliament by law
 The resolution states that the imposition of ceiling on urban immovable property and the acquisition of such property in excess of the ceiling limit with a view to utilising such excess property for public purposes and all other matters connected therein or incidental thereto shall be regulated in this State by Parliament by law
The basic question that arises is what is the actual content of the subject matter that was resolved to be entrusted to Parliament by the State Legislature under Article 252 of the Constitution
From the resolution it is clear that the subject matter that was resolved to be entrusted to the Parliament was the one imposing a ceiling on urban immovable property and acquisition of such property in excess of the ceiling
It is true that this subject matter is the topic that falls within Entry 18 of List 11 of Schedule VII to the Constitution and the said subject matter of Entry 18 has been originally kept apart for the State Legislature to make law and Parliament had no competence in respect of those matters falling under the wide scope of Entry 18
Now by virtue of this resolution a part of the area falling under Entry 18 is transferred to the domain of Parliament to make law relating to the matters within the transferred area
The scope of Entry 18 is very wide and the land mentioned therein may be agricultural or non agricultural and may be rural or urban
The subject matter carved out of Entry 18 under the resolutions passed by the various State Legislatures related to only urban immovable property and by virtue of the resolution the law that can be enacted by the Parliament should be a law imposing a ceiling on such urban immovable property
The learned counsel for the petitioners however urged that vesting of tenanted land in the State and conferment of occupancy rights under the provisions of the State Act directly fall under the subject of imposing ceiling on and holding and other matters incidental or ancillary to the main topic of imposing ceiling and therefore they are fully covered by the Ceiling Act passed by the Parliament and the same supersedes the State enactment in respect of this land
The learned counsel appearing for the respondents on the contrary submitted that imposition of ceiling is a distinct and separately identifiable subject and is the power carved out of Entry 18 and vested in the Parliament to legislate and that the power of the State to legislate in respect of the remaining part of the subject matter is unaffected and that when two distinct powers have come into existence vesting law making competence in the State and Parliament the pith and substance of the laws made by each of them has to be examined to see whether any one of them encroaches the field set apart as falling within the competence of the other body
The learned counsel for the respondents however submitted that in any event the provisions of Chapter III of the Act have nothing to do with the imposition of ceiling on the urban land and that conferring of occupancy rights etc
to the tenants under Chapter 111 of the Act do not come under the category of the matters connected therewith or ancillary or incidental to the imposition of ceiling on urban immovable property
Now we shall refer to the provisions of the Urban Ceiling Act
The Statement of Objects and Reasons under Preamble to the said Act would show that the primary object and the purpose is to provide for the imposition of ceiling on vacant land in urban agglomeration and for acquisition of such lands in excess of the ceiling limit and to regulate the Marwaha and others
  Miss Neelima Shangla vs State of Haryana and others   or Jitendra Kumar and others vs State of Punjab and others If we have regard to the above enunciation that a candidate who finds a place in the select list as a candidate selected for appointment to a civil post does not acquire an indefeasible right to be appointed in such posting the absence of any specific Rule entitling him for such appointment and he could be aggrieved by his non appointment only when the Administration does so either arbitrarily or for no bona fide reasons it follows as a necessary concomitant that such candidate even if has a legitimate expectation of being appointed in such posts due to his name finding a place in the select list of candidates cannot claim to have a right to be heard before such select list is cancelled for bona fide and valid reasons and not arbitrarily In the instant case when the Chandigarh Administration which received the complaints about the unfair and injudicious manner in which select list of candidates for appointment as conductors in CTU was prepared by the Selection Board constituted for the purpose found those complaints to be well founded on an enquiry got made in that regard we are unable to find that the Chandigarh Administration had acted either arbitrarily or without bona fide and valid reasons in cancelling such 0dubious select list
Hence the contentions of the learned counsel for the Respondents as to the sustainability of the Judgment of CAT under appeal on the ground of non affording of an opportunity of hearing to the Respondents candidates in the select list is a misconceived one and is consequently rejected
In the result we allow this appeal set aside the Judgment under appeal and reject the applications made by Respondents before CAT Chandigarh
However in the facts and circumstances of this appeal we make no order as to costs
GN Appeal allowed
FOOD CORPORATION OF INDIA V KAMDHENU CATTLE FEED INDUSTRIES NOVEMBER 3 1992 JS VERMA YOGESHWAR DAYAL AND N VENKATACHALA JJ Constitution of India 1950 Article 14 Contractual transactions of State or its instrumentality Essential requisites Non arbitrariness fairness in action and due consideration of legitimate expectation Ignoring the highest bid Negotiations for higher offer and acceptance thereof Validity of
Administrative Law Doctrine of legitimate expectation Forms part of non arbitrariness and Rule of Law To be determined in the larger public interest Open to judicial review
The appellant Corporation invited tenders for sale of stocks of damaged food grains
The respondent s bid was the highest
Since the appellant was not satisfied about the adequacy of the amount offered even in the highest tender it invited all the tenders to participate in the negotiations instead of accepting the highest tender
During the course of negotiations the respondent refused to revise the rates in its offer
On the basis of the highest bid made during the negotiations the appellant disposed of the stocks of damaged foodgrains rejecting the highest tenders
The respondent whose tender was the highest challenged the decision of the appellants by filing a Writ Petition before the High Court
It was contended that the action of the appellant was arbitrary and hence violative of article 14 of the Constitution
The High Court accepted the contention and allowed the Writ Petition
Being aggrieved by the High Court s decision the appellant Corporation preferred the present appeal
It was contended on behalf of the appellant that there being no right in the person submitting the highest tender to claim acceptance thereof and since all tenderers were given equal opportunity to participate in the negotiations and to revise the bid before acceptance the action of the appellant was not arbitrary
The Respondent contended that since no cogent reasons were indicated for rejecting all the tenders and for deciding to dispose of the stock by negotiating with the tenderers for procuring a higher price such a decision was arbitrary
Allowing the appeal this Court HELD 11
In contractual sphere as in all other State actions the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non arbitrariness is a significant facet
There is no unfettered discretion in public law
A public authority possesses powers only to use them for public good
This imposes the duty to act fairly and to adopt a procedure which is fairplay in action 
Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities with this element forming a necessary component of the decision making process in all State actions
To satisfy this requirement of non arbitrariness in a State action it is necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case
The decision so made would be exposed to challenge on the ground of arbitrariness
Rule of law does not completely eliminate discretion in the exercise of power as it is unrealistic but provides for control of its exercise by judicial review
328 A D 12
The mere reasonable or legitimate expectation of a citizen in such a situation may not by itself be a distinct enforceable right but failure to consider and give due weight to it may render the decision arbitrary and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non arbitrariness a necessary concomitant of the rule of law
Every legitimate expectation is a relevant factor requiring due consideration in a fair decision making process
Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case
Whenever the question arises it is to be determined not according to the claimant s perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant
A bona fide decision of the public authority reached in this manner would satisfy the requirement of non arbitrariness and withstand judicial scrutiny
328 E G 21
Even though the highest tenderer can claim no right to have his tender accepted there being a power while inviting tenders to reject all the tenders yet that power cannot be exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action
The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete
Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund
Accordingly inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price
Retaining the option to accept the highest tender in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest
A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement
This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good
329 E H 330 A Shanti Vijay  Co etc
vs Princess Fatima Fouzia  Ors
 1980 I SCR 459 relied on
Council of Civil Service Unions and Others vs Minister for the Civil Service  and In re Preston   referred to
In the instant case the respondent s highest tender was super seded only by a significantly higher bid made during the negotiations with all tenderers giving them equal opportunity to compete by revising their bids
The fact that it was a significantly higher bid obtained by adopting the right course is sufficient to demonstrate that the action of the appellant satisfied the requirement of non arbitrariness and it was taken for the cogent reason of inadequacy of the price offered in the highest tender which reason was evident to all tenderers invited to participate in the negotiations and to revise their bids
The High Court was in error in taking the contrary view
330 D E CIVIL APPELLATE JURISDICTION Civil Appeal No 4731 of 1992
From the Judgment and Order dated 21792 of the CWN 7419 of 1992
YP Rao for the Appellant
Ashok Sen HL Aggarwal and KK Gupta NP for the Respondent
The Judgment of the Court was delivered by VERMA J
Leave granted
The appeal by special leave under Article 136 of the Constitution is against the judgment and order dated 21792 by which the Civil Writ Petition No 7419 of 1992 has been allowed by the Punjab  Haryana High Court directing the appellant Food Corporation of India to allot to the respondent the necessary stocks of damaged rich for which the tenders had been invited by the appellant since the respondent was the highest bidder
The appellant invited tenders for sale of stocks of damaged foodgrains in accordance with the terms and conditions contained in the tender notice Annexure A 
The tenders were required to be submitted upto 245 pm on 18592 the tenders were to be opened on 18592 at 300 pm and offers were to remain open for acceptance upto and inclusive of 17792
The respondent submitted its tender for a stock of damaged rice within the time specified but the respondent s tender was conditional and the full amount of earnest money required by the terms was also not deposited
It is however not necessary to mention the particulars of these two deficiencies in respondent s tender since they appear to have been waived by the appellant and are not relied on before us to support the appellant s action
The respondent s bid in the tender was admittedly the highest as found on opening the tenders
lt appears that the appellant was not satisfied about the adequacy of the amount offered in the highest tenders for purchase of the stocks of damaged foodgrains and therefore
instead of accepting any of the tenders submitted the appellant invited all the tenderers to participate in the negotiation on 9692
The respondent refused to revise the rates offered in its tender
It was Rs 245 per quintal for certain lots of this stock while the highest offer made during the negotiations was Rs 27572 per quintal
Similarly as against the respondent s offer of Rs 201 per quintal in respect of some other lots the highest offer made during the negotiation was Rs 27155 per quintal
On this basis the appellant was to receive an additional amount of Rs 8 lakhs by accepting the highest offer made during the negotiations over the total amount offered by the respondent for the stock of damaged rice
Overall the appellant was offered an excess amount of Rs 20 lakhs for the entire stock of damaged foodgrains in the highest offer made during the negotiations inasmuch as against the total amount Rs90 lakhs which the appellant would have received by acceptance of the highest tenders the appellant was to receive the amount of Rs 1 crore 10 lakhs by accepting the highest offers made during the negotiations in which all the tenderers including the respondent were given equal opportunity to participate
The respondent filed the above Writ Petition in the High Court challenging the appellant s refusal to accept the highest tender submitted by it for the stock of damaged rice claiming that the appellant having chosen to invite tenders it could not thereafter dispose of the stocks of damaged foodgrains by subsequent negotiations rejecting the highest tenders on the ground that a higher bid was obtained by negotiations
This action of the appellant was alleged to be arbitrary and therefore in substance violative of Article 14 of the Constitution
The High Court by its impugned order accepted this contention of the respondent and allowed the Writ Petition
Hence this appeal
It is not disputed that according to the terms and conditions on which the appellant had invited tenders the appellant had reserved the right to reject all the tenders and therefore the highest tender was not bound to be accepted
Learned counsel for the appellant submitted that there being no right in the person submitting the highest tender to claim acceptance of the tender in a case like the present
where all the tenderers including the respondent were invited for negotiation and given equal opportunity to participate and to revise the bid before acceptance of the highest bid offered during negotiation which resulted in obtaining an additional amount of Rs 8 lakhs for the stock relating to respondent s tender and an overall gain of Rs 20 lakhs in disposal of the entire stock of damaged foodgrains the action of the appellant could not be termed arbitrary
In reply Shri AK Sen learned counsel for the respondent contended that even though the appellant had the right to reject any tender including the highest tender and thereafter negotiate with all the tenderers to procure the highest price for the commodity yet this right has to be exercised reasonably and not arbitrarily otherwise the credibility of the procedure of sale by inviting tenders would be lost
Shri Sen submitted that the decision not to accept any tender and to negotiate thereafter for obtaining a higher price than that quoted in the highest bid cannot be taken on the whim and caprice of the concerned authority and can be only for cogent reasons indicated while taking the decision or else the decision would be arbitrary
On this basis Shri Sen further submitted that in the present case no cogent reasons were indicated for rejecting all the tenders and deciding to dispose of the commodity by negotiation with the tenderers for procuring a higher price
He also added that the mere fact that a higher price was obtained by negotiation would not justify the decision if it was not taken in the manner permissible
This was the only submission of Shri Sen to support the decision of the High Court
In our view Shri AK Sen is right in the first part of his submission
However in the present case the respondent does not get any benefit therefrom
The High Court s decision is based on the only ground that once tenders have been invited and the highest bidder has come forward to comply with the conditions stipulated in the tender notice it is not permissible to switch over to negotiation with all the tenderers and thereby reject the highest tender
According to the High Court such a procedure is not countenanced by the rule of law
This is not the same as the submission of Shri Sen which is limited to permissibility of such a course only on cogent grounds indicated while deciding to switch over to the procedure of negotiation after receiving the tenders to satisfy the requirement of non arbitrariness a necessary concomitant of the rule of law
The proposition enunciated by the High Court which forms the sole basis of its decision is too wide to be acceptable and has to be limited in the manner indicated hereafter
In contractual sphere as in all other State actions the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non arbitrariness is a significant facet
There is no unfettered discretion in public law A public authority possesses powers only to use them for public good
This impose the duty to act fairly and to adopt a procedure which is fairplay in action 
Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities with this element forming a necessary component of the decision making process in all State actions
To satisfy this requirement of non arbitrariness in a State action it is therefore necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely lo be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case
The decision so made would be exposed to challenge on the ground of arbitrariness
Rule of law does not completely eliminate discretion in the exercise of power as it is unrealistic but providers for control of its exercise by judicial review
The mere reasonable or legitimate expectation of a citizen in such a situation may not by itself be a distinct enforceable right but failure to consider and give due weight to it may render the decision arbitrary and this is how the requirement of due consideration of a Legitimate expectation forms part of the principle of non arbitrariness a necessary concomitant of the rule of law
Every legitimate expectation is a relevant factor requiring due consideration a fair decision making process
Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case
Whenever the question arises it is to be determined not according to the claimant s perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant
A bona fide decision of the public authority reached in this manner would satisfy the requirement of non arbitrariness and withstand judicial scrutiny
The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent
In Council of Civil Service Unions and Others vs Minister for the Civil Service the House of Lords indicated the extent to which the legitimate expectation interfaces with exercise of discretionary power
The impugned action was upheld as reasonable made on due consideration of all relevant factors including the legitimate expectation of the applicant wherein the considerations of national security were found to outweigh that which otherwise would have been the reasonable expectation of the applicant
Lord Scarman pointed out that the controlling factor in determining whether the exercise of prerogative power is subject to judicial review is not its source but its subject matter 
Again in In re preston  it was stated by Lord Scarman that the principle of fairness has an important place in the law of judicial review  ant unfairness in the purported exercise of a power can be such that it is an abuse of excess of power 
These decisions of the House of Lords give a similar indication of the significance of the doctrine of legitimate expectation
Shri AK Sen referred to Shanti Vijay  Co etc
vs Princess Fatima Fouzia  Ors
etc 1980 1 SCR 459 which holds that court should interfere where discretionary power is not exercised reasonably and in good faith
From the above it is clear that even though the highest tenderer can claim no right to have his tender accepted there being a power while inviting tenders to reject all the tenders yet the power to reject all the tenders cannot be exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action
The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete
Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund
Accordingly inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price
The inadequacy may be for several reasons known in the commercial field
Inadequacy of the prince quoted in the highest tender would be a question of fact in each case
Retaining the option to accept the highest tender in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest
A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement
This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise power for public good
In the present case the last date upto which the offer made in the tender was to remain open for acceptance was 17792
After opening the tenders on 18592 the appellant decided to negotiate with all the tenderers on 9692 when significantly higher amount as indicated earlier was offered above the amount quoted in the highest tender
In such a situation if the negotiations did not yield the desirable result of obtaining a significantly higher price the appellant had the option to accept the highest tender before the last date viz 17792 upto which the offer made therein was to remain open for acceptance
In this manner the respondent s higher tender was superseded only by a significantly higher bid made during the negotiations with all tenderers giving them equal opportunity to compete by revising their bids
The fact that it was a significantly higher bid obtained by adopting this course is sufficient in the facts of the present case to demonstrate that the action of the appellant satisfied the requirement of non arbitrariness and it was taken for the cogent reason of inadequacy of the price offered in the highest tender which reason was evident to all tenderers invited to participate in the negotiations and to revise their bids
The High Court was in error in taking the contrary view
Consequently this appeal is allowed
The impugned judgment of the High Court is set aside resulting in dismissal of the respondent s writ petition No costs GN Appeal allowed
KRISHNA BHIMRAO DESHPANDE vs LAND TRIBUNAL DHARWAD AND ORS
NOVEMBER 3 1992 LALIT MOHAN SHARMA AND K JAYACHANDRA REDDY JJ Constitution of India 1950 Article 252 read with Schedule VII List n Entry 18 Legislation by Parliament Requirement Central Law on ceiling on urban immovable property in pursuance of Resolution of State Legislature State Laws on other matters relating to the subject matter of resolution Legality of
Constitution of India 1950 Article 252 Schedule VII list II Entry 18 Urban Land Ceiling and Regulation Act 1976 and Karnataka Land Reforms Act as amended in 1974 Object and application of Whether any conflict between the Acts
In the year 1972 the Karnataka Legislature passed a resolution under Article 252 of the Constitution imposing a ceiling on urban immovable property and the acquisition of such property in excess of the ceiling is limit for public purposes and all the matters connected therewith shall be regulated in the State by Parliament by law
On 1474 the Karnataka Land Reforms Amendment Act was enacted and under the Act the tenant of the land covered by the Act was entitled to the grant of occupancy rights after making an application under the Act
The Act came Into force with effect from 2185
But for the purpose of grant of occupancy rights 1474 was the relevant date
In the year 1975 the Karnataka Urban Agglomeration Ordinance was passed whereunder all lands between the periphery of 8 KMs
of the municipal limits of Hubli Dharwad were declared as urban agglomeration land
The Parliament passed the Urban Land Ceiling and Regulation Act 1976 for imposition of ceiling on urban properties and the Ceiling Act was made applicable to Karnataka also in view of the resolution passed by the State Government
The lands involved in the present cases were covered by the development plan by the Belgaum City Town Planning authority as per the Master Plan and they were included and declared as urban agglomeration in the City of Hubli under the provisions of the Ceiling Act
The owners of the agglomeration lands challenged the order of the Land Tribunal under the Land Reforms Act conferring occupancy rights on the tenants before the High Court
They contended that the lands involved in the cases were within the purview of the Ceiling Act and therefore the provisions of the Land Reforms Act had no application to such lands on the ground that the provisions of the Ceiling Act
The writ petitions were dismissed by the High Court
The owner s writ appeals were also dismissed by a common judgment by the Division Bench of the High Court
The Division Bench held that there was no conflict between the two enactments
The judgment of the Division Bench was challenged in SLP Civil No 16041 4288
Many of the similar writ petitions that were pending before the High Court were transferred to the Land Reforms Appellate Tribunal
The Appellate Tribunal dismissed the petitions by a common order following the judgment of the Division Bench of the High Court
Several Civil revision petitions filed by the land owners against the order of the Appellate Tribunal were dismissed by the High Court
Some of the special leave petitions were filed against the order of the High Court in the said civil revision petitions
The petitioners land owners contended that when in pursuance of the resolution of the State Legislature passed under Article 252 of the Constitution the Parliament legislated in respect of the topic covered by the resolution
The Parliamentary law repealed or superseded the existing State legislation on the topic and therefore such law could not be enforced thereafter and that vesting of tenanted land in the State and conferment of occupancy rights under the provisions of the State Act directly fall under the subject of imposing ceiling on land holding and other matters incidental or ancillary to the main topic of imposing ceiling and therefore they were fully covered by the Ceiling Act passed by the Parliament and the same superseded the State enactment in respect of such lands
The respondents submitted that imposition of ceiling was a distinct and separately identifiable subject and the Parliament was empowered to legislate that the power of the State to legislate in respect of the remaining part of the subject matter was unaffected that when two distinct powers came into existence vesting law making competence in the State and Parliament the pith and substance of the laws made by each of them had to be examined to see whether any one of them encroached the field set apart as falling within the competence of the other body that in any event the provisions of Chapter III of the Karnataka Land Reforms Act had nothing to do with the imposition of ceiling on the urban land and that conferring of occupancy rights etc
to the tenants under Chapter III of the Karnataka Land Reforms Act did not come under the category of the matters connected therewith or ancillary or incidental to the imposition of ceiling on urban immovable property
Dismissing the special leave petitions this Court HELD 101
Article 252 empowers the Parliament to legislate for two or more States on any of the matters with respect of which the Parliament has no power to make law except as provided under Articles 249 and 250
This power to legislate is vested in the Parliament only if two or more State Legislatures think it desirable to have a law enacted by Parliament on such matters in List II ie with respect to which the Parliament has no power to make law for the State
The passing of the resolutions by the State Legislatures is a condition precedent for vesting the Parliament with such power
339 C D 102
The scope of Entry 18 is very wide and the land mentioned therein may be agricultural or non agricultural and may be rural or urban
The subject matter carved out of Entry 18 under the resolutions passed by The various State Legislatures related to only urban immovable property and by virtue of the resolution the law that can be enacted by the Parliament should be a law imposing a ceiling on such urban immovable property 340 B C 103
From the resolution it is clear that the subject matter that was resolved to be entrusted to the Parliament was the one imposing a ceiling on urban immovable property and acquisition of such property in excess of the ceiling
This subject matter is the topic that falls within Entry 18 of List II of Schedule VII to the Constitution and the subject matter of Entry 18 has been originally kept apart for the State Legislature to make law and Parliament had no competence in respect of those matters falling under the wide scope of Entry 18
By virtue of this resolution a part of the area falling under Entry 18 is transferred to the domain of Parliament to make law relating to the matters within the transferred area
339 G H 341 A 201
The primary object and the purpose of the Urban Land Ceiling and Regulation Act 1976 is to provide for the imposition of ceiling on vacant land in urban agglomeration and for acquisition of such lands in excess of the ceiling limit and to regulate the construction of buildings on such lands and for matters connected therewith
340 H 341 A 202
The Karnataka Land Reforms Act as amended in 1974 is a welfare legislation
The object of the Act was to have a uniform law in the State of Karnataka relating to agrarian reforms conferment of ownership on tenants ceiling on land holdings and for certain other matters contained therein
342 D 203
In respect of imposing ceiling on the land under urban agglomeration the provisions of the Ceiling Act alone are applicable and to that extent the provisions of Chapter IV of the Karnataka Land Reforms Act which also deal with the imposition of ceiling would not be applicable
344 C 204
The land in the instant case comes under the urban agglomeration the imposition of the ceiling should naturally be under the provisions of the Urban Ceiling Act and not under the Karnataka Land Reforms Act
344 B C 205
Imposition of ceiling on urban land is a distinct and independent subject as compared to imposition of ceiling on owning or to hold agricultural land or any other kind of property which do not attract the Urban Ceiling Act
These are two distinct powers and therefore the law making competence can be in two different legislative bodies
Consequently it is difficult to hold that the provisions of Chapter III of the Karnataka Land Reforms Act are outside the legislative competence of the State Legislature
350 C D 206
The one topic that is transferred in the resolution passed under Article 252 as distinct and separately identifiable and does not include the remaining topics under Entry 18 in respect of which the State alone has the power to legislate
351 D 207
The legislative power of the State has to be reconciled with that of the Parliament and that in their respective fields each is supreme
Even assuming that the State enactment has same effect on the subject matter falling within the Parliament s legislative competence that by itself will not render such law invalid or inoperative
350 G H 208
There is no conflict between the Ceiling Act and the State Act
The imposition of ceiling on urban immovable property is an independent topic and cannot be construed as to nullify the other subject left in the domain of the State Legislature under Entry 18 inasmuch as imposition of ceiling is a distinct and separately identifiable subject and does not cover the other measures such as regulation of relationship of landlord and tenant in respect of which the State Legislature has competence to legislate
351 C D 209
There is a ceiling provision under Section 452 of the Karnataka Land Reforms Act providing for computation of the area in respect of which the tenant may be granted occupancy rights
But it is clear that ceiling on the area in this context is only for the purpose of Section 45
351 F 210
Provisions in the Chapters II III V VI to XI of the Karnataka Land Reforms Act deal with the conferment of occupancy rights on the respective tenants and they do not in any way conflict with the subject matter transferred to the Parliament by the resolution passed under Section 252
351 EF Thumati Venkaiah and others vs State of Andhra Pradesh and of others   Union of India and others vs Valluri Basavaiah Chowdhary and others   Calcutta Gas Company Proprietory Ltd vs State of West Bengal and others and Kannan Devan Hills Produce Company Ltd vs The State of Kerala etc  referred to
CIVIL APPELLATE JURISDICTION Special Leave Petition Civil Nos
16041 4288
From the Judgment and Order dated 2771988 of the Karnataka High Court in WP
No 917386 and WA
No 270785
WITH SLP C Nos 12258 12254 1226090  860891 RN Narasimhamurthy SS Javali SN Bhat and Ravi P Wadhwani for the Petitioners
MS Nesargi R Jagannath Goulay MK Dua M Veerappa KH Nobin Singh SK Kulkarni and Surya Kant for the Respondents
The following Order of the Court was delivered by K JAYACHANDRA REDDY J
In all these special leave petitions the common question that arises for consideration is whether the provisions of the Karnataka Land Reforms Act 1961 as amended in 1974 Act  for short cease to be applicable in all respects to the lands which came within the purview of the Urban Land Ceiling and Regulation Act 1976  Ceiling Act  for short
The lands involved in these matters are covered by the development plan by the Belgaum City Town Planning authority as per the Master Plan for the said City and they are included and declared as urban agglomeration in the City of Hubli under the provisions of the Ceiling Act
In the year 1972 the Karnataka Legislature passed a resolution under Article 252 of the Constitution to the effect that imposing a ceiling on urban immovable property and the acquisition of such property in excess of the ceiling limit for public purposes and all the matters connected therewith shall be regulated in the State by Parliament Qby law
The State Legislature thus divested itself of the legislative competence to enact law in respect of subject matter of the resolution
On 1474 the amended Karnataka Land Reforms Act was enacted and under the said Act the tenant of the land covered by the Act is entitled to the grant of occupancy rights after making an application under the Act
This Act came into force with effect from 2185
But for the purpose of grant of occupancy rights 1474 was the relevant date
While so in the year 1975 the Governor of Karnataka passed the Urban Aggolmeration Ordinance whereunder all lands between the periphery of 8 KMs
of the municipal limits of Hubli Dharwad were declared as urban agglomeration land
In the year 1976 the Parliament passed the Ceiling Act for imposition of ceiling on urban properties and the Act was made applicable to Karnataka also in view of the resolution passed by the State Government referred to above
The order of the Land Tribunal under the Act conferring occupancy rights on the tenants was challenged before the High Court contending that the lands involved in these cases were within the purview of the Ceiling Act and therefore the provisions of the Land Reforms Act had no application to such lands on the ground that the provisions of the State Act were repugnant to the provisions of the Central Act namely the Ceiling Act
The writ petition was dismissed by the High Court
The owners preferred writ appeals and they were also dismissed by a common judgment in Writ Appeal Nos 2707 and 236185 etc
The Division Bench held that there is no conflict between the two enactment in certain respect ie atleast so far as the implementation of the provisions of Chapter III of the Act are concerned and that provisions of this Chapter of the Act do not cease to apply to the agricultural lands coming within the meaning of urban agglomeration in the Ceiling Act
The judgment of the Division Bench is challenged in SLPCivil No 16041 4288
Many of the similar writ petitions that were pending before the High Court were transferred to the Land Reforms Appellate Tribunal
The Appellate Tribunal dismissed the petitions by a common order following the judgment of the Division Bench of the High Court in Writ Appeal No270785 and connected matters
Several civil revisions petitions filed by the land owners against the order of the Appellate Tribunal were dismissed by the High Court
Some of the special leave petitions are filed against the order of the High Court in the said civil revision petitions
Therefore all these special leave petitions can be disposed of by a common order
It was urged before us that the resolution of the State Legislature passed under Article 252 of the Constitution shifted the topic covered by the resolution from List II of Schedule VII to the Constitution and vested the competence to make the law in respect of the said topic in the Parliament and that thereafter the State enactment ceased to have efficacy in respect of said topic
Alternatively it was urged that when in pursuance of the resolution the Parliament legislates in respect of the topic covered by the resolution the Parliamentary law repeals or supersedes any existing State legislation on the topic and therefore such law cannot be enforced thereafter
We shall first extract some of the relevant provisions of the Constitution of India and the respective enactments
Article 246 of the Constitution reads thus 246
Subject matter of laws made by Parliament and by the Legislatures of States l Notwithstanding anything in clauses 2 and 3 Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule in this Constitution referred to as the Union List
2 xx xx xx 3 Subject to clauses 1 and 2 the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule in this Constitution referred to as the State List
4xx xx xx  2 Entry 18 in List II namely the State List of the VII Schedule to the Constitution is in the following terms 18
Land that is to say rights in or over land land tenures including the relation of landlord and tenant and the collection of rents transfer and alienation of agricultural land land improvement and agricultural loans colonization
 Article 252 of the Constitution reads thus 252
Power of Parliament to legislate for two or more States by consent and adoption of such legislation by any other State 1 If it appears to the Legislatures of two or more States to be desirable that any of the matters with respect to which Parliament has no power to make laws for the States except as provided in Articles 249 and 250 should be regulated in such States by Parliament by law and if resolutions to that effect are passed by all the Houses of the Legislatures of those States it shall be lawful for Parliament to pass an Act for regulating that matter accordingly and any Act so passed shall apply to such States and to any other State by which it is adopted afterwards by resolution passed in that behalf by the House or where there are two Houses by each of the Houses of the Legislature of that State
2 Any Act so passed by Parliament may be amended or repealed by an Act of Parliament passed or adopted in like manner but shall not as respects any State to which it applics be amended or repcaled by an Act of the Legislature of that State
 Article 252 empowers the Parliament to legislate for two or more States on any of the matters with respect of which the Parliament has no power to make law except as provided under Articles 249 and 250
This power to legislate is vested in the Parliament only if two or more State Legislatures think it desirable to have a law enacted by Parliament on such matters in List II ie with respect to which the Parliament has no power to make law for the State
The passing of the resolutions by the State Legislatures is a condition precedent for vesting the Parliament with such power
The relevant portion of the resolution passed by the State Legislature under Article 252 reads thus Now therefore in pursuance of clause 1 of Article 252 of the Constitution this Assembly hereby resolves that the imposition of a ceiling on urban immovable property and F acquisition of such property in excess of the ceiling and all matters connected therewith or ancillary and incidental thereto should be regulated in the State of Karnataka by Parliament by law
 The resolution states that the imposition of ceiling on urban immovable property and the acquisition of such property in excess of the ceiling limit with a view to utilising such excess property for public purposes and all other matters connected therein or incidental thereto shall be regulated in this State by Parliament by law
The basic question that arises is what is the actual content of the subject matter that was resolved to be entrusted to Parliament by the State Legislature under Article 252 of the Constitution
From the resolution it is clear that the subject matter that was resolved to be entrusted to the Parliament was the one imposing a ceiling on urban immovable property and acquisition of such property in excess of the ceiling
It is true that this subject matter is the topic that falls within Entry 18 of List 11 of Schedule VII to the Constitution and the said subject matter of Entry 18 has been originally kept apart for the State Legislature to make law and Parliament had no competence in respect of those matters falling under the wide scope of Entry 18
Now by virtue of this resolution a part of the area falling under Entry 18 is transferred to the domain of Parliament to make law relating to the matters within the transferred area
The scope of Entry 18 is very wide and the land mentioned therein may be agricultural or non agricultural and may be rural or urban
The subject matter carved out of Entry 18 under the resolutions passed by the various State Legislatures related to only urban immovable property and by virtue of the resolution the law that can be enacted by the Parliament should be a law imposing a ceiling on such urban immovable property
The learned counsel for the petitioners however urged that vesting of tenanted land in the State and conferment of occupancy rights under the provisions of the State Act directly fall under the subject of imposing ceiling on and holding and other matters incidental or ancillary to the main topic of imposing ceiling and therefore they are fully covered by the Ceiling Act passed by the Parliament and the same supersedes the State enactment in respect of this land
The learned counsel appearing for the respondents on the contrary submitted that imposition of ceiling is a distinct and separately identifiable subject and is the power carved out of Entry 18 and vested in the Parliament to legislate and that the power of the State to legislate in respect of the remaining part of the subject matter is unaffected and that when two distinct powers have come into existence vesting law making competence in the State and Parliament the pith and substance of the laws made by each of them has to be examined to see whether any one of them encroaches the field set apart as falling within the competence of the other body
The learned counsel for the respondents however submitted that in any event the provisions of Chapter III of the Act have nothing to do with the imposition of ceiling on the urban land and that conferring of occupancy rights etc
to the tenants under Chapter 111 of the Act do not come under the category of the matters connected therewith or ancillary or incidental to the imposition of ceiling on urban immovable property
Now we shall refer to the provisions of the Urban Ceiling Act
The Statement of Objects and Reasons under Preamble to the said Act would show that the primary object and the purpose is to provide for the imposition of ceiling on vacant land in urban agglomeration and for acquisition of such lands in excess of the ceiling limit and to regulate the construction of buildings on such lands and for matters connected therewith
Section 21n of the Urban Ceiling Act defines urban agglomeration and the material part of it reads thus n urban agglomeration A in relation to any State or Union territory specified in column 1 of Schedule 1 means i the urban agglomeration specified in the corresponding entry in column 2 thereof and includes the peripheral area specified in the corresponding entry in column 3 thereof and xx xx xx Section 2o defines urban land which reads thus o urban land means i any land situated within the limits of an urban agglomeration and referred to as such in the master plan or ii in a case where there is no master plan or where the master plan does not refer to any land as urban land any land within the limits of an urban agglomeration and situated in any area included within the local limits of a municipality by whatever name called a notified area committee a town area committee a city and town committee a small town committee a cantonment board or a panchayat but does not include any such land which is mainly used for the purpose of agriculture
Explanation For the purpose of this clause and clause q A xx xx xx B land shall not be deemed to be used mainly for the purpose of agriculture if such land is not entered in the revenue or land records before the appointed day as for the purpose of agriculture xx xx xx C notwithstanding anything contained in clause B of this Explanation land shall not be deemed to be mainly used for the purpose of agriculture if the land has been specified in the master plan for a purpose other than agriculture For the purpose of the instant case it is enough to note that Hubli Dharwad is shown in the Schedule and there is also a master plan prepared for the area and the land in question also is undoubtedly within the urban agglomeration and therefore there is no doubt that in respect of imposition of ceiling on this area comes within the purview of the Urban Ceiling Act
But the question is whether granting occupancy rights under Chapter III of the Act are in any manner affected
The Karnataka Land Reforms Act as amended in 1974 is a welfare legislation
The object of the Act was to have a uniform law in the State of Karnataka relating to agrarian reforms conferment of ownership on tenants ceiling on land holding and for certain other matters contained therein
Section 34 of the Act defines tenant thus 34 tenant means an agriculturist who cultivates personally the land he holds on lease from a landlord and includes i a person who is deemed to be a tenant under Section 4 ii a person who was protected from eviction from any land by the Karnataka Tenants Temporary Protection from Eviction Act 1961 iia a person who cultivates personally any land on lease under a lease created contrary to the provisions of section 5 and before the date of commencement of the Amendment Act iii a person who is a permanent tenant and iv a person who is a protected tenant
Explanation A person who takes up a contract to cut grass or to gather the fruits or other produce of any land shall not on that account only be deemed to be a tenant
 The provisions of Chapter III of the Karnataka Land Reforms Act deal with conferment of ownership on tenants
Section 45 occurring in this Chapter in particular deals with conferring of occupancy rights on the tenants subject to certain conditions
The relevant portion of Section 45 reads as under 45
Tenants to be registered as occupants of land on certain conditions 1 Subject to the provisions of the succeeding sections of this Chapter every person who was a permanent tenant protected tenant or other tenant or where a tenant has lawfully sublet such sub tenant shall with effect on and from the date of vesting be entitled to be registered as an occupant in respect of the lands of which he was a permanent tenant protected tenant or other tenant or sub tenant before the date of vesting and which he has been cultivating personally
2 If a tenant or other person referred to in sub section 1 i holds land partly as owner and partly as tenant but the area of the land held by him as owner is equal to or exceeds a ceiling area he shall not be entitled to be registered as an occupant of the land held by him as a tenant before the date of vesting ii does not hold and cultivate personally any land as an owner but holds land as tenant which he cultivates personally in excess of a ceiling area he shall be entitled to be registered as an occupant to the extent of a ceiling area iii holds and cultivates personally as an owner of any land the area of which is less than a ceiling area he shall be entitled to be registered as an occupant to the extent of such area as will be sufficient to make up his holding to the extent of a ceiling area
xx xx xx The provisions under Chapter III which exclusively deal with conferment of occupancy rights on tenants have nothing to do with the imposition of ceiling on holdings of agricultural land under the Act
It is only Chapter IV of the said Act which deals with ceiling on land holdings
Now that the land in the instant case comes under the urban agglomeration the imposition of the ceiling should naturally be under the provisions of the Urban Ceiling Act and not under the Karnataka Land Reforms Act
The High Court however did not deal with this aspect
Perhaps it is necessary for us to make it clear that in respect of imposing ceiling on the land under urban agglomeration the provisions of the Ceiling Act alone are applicable and to that extent the provisions of Chapter IV of the Act which also deal with the imposition of ceiling would not be applicable
As a matter of fact in Thumati Venkaiah and Others vs State of Andhra Pradesh and Others  to which we will refer to at a later stage in detail on the main point this Court observed thus It is no doubt true that if the Andhra Pradesh Act seeks to impose ceiling on land falling within an urban agglomeration it would be outside the area of its legislative competence since it cannot provide for imposition of ceiling on urban immovable property However the crucial question in the instant case with which we are concerned is whether the provisions of Chapter III of the Act also become inoperative by virtue of the resolution passed under Article 252 and particularly on the ground that it is a matter of imposition of ceiling on urban land or other matters connected therewith or ancillary and incidental thereto
A plain reading of the above provisions in the background of the objects underlying these two enactments clearly shows that the two Acts operate in two different fields to a large extent
This Court had an occasion to consider these aspects in a few cases
In Union of India and others vs
Valluri Basavaiah Chowdhary and others  this Court in respect of effect of passing a resolution under Article 252 of the Constitution by the Andhra Pradesh Legislature observed thus The effect of the passing of a resolution under clause 1 of Article 252 is that Parliament which has no power to legislate with respect to the matter which is the subject of the resolution becomes entitled to legislate with respect to it
On the other hand the State Legislature ceases to have a power to make a law relating to that matter
 It was further observed that 
It is not disputed that the subject matter of Entry 18 List II of the Seventh Schedule ie land  covers land and buildings  and would therefore necessarily include vacant land 
The expression urban immovable property  may mean land and buildings or buildings  or lands 
It would take in lands of every description ie agricultural land urban land or any other kind and it necessarily includes vacant land
 With regards the concept of ceiling on urban immovable property and the object underlying in passing the resolution by the several State Governments under Article 252 it was further observed in the above judgment thus 
A Working Group was constituted under the Chairmanship of the Secretary Ministry of Works Housing and Urban Development
The report of the Working Group shows that the proposal was to impose a ceiling on urban immovable property
In the report the said Working Group defined urban area  to include the area within the territorial limits of municipalities or other local bodies and also the peripheral area outside the said limits
Such inclusion of the peripheral limits in an urban area was accepted by the Government and a model bill prepared in pursuance thereof also contained such a definition
A copy of each of the report of the Working Group and the Model Bill referred to was placed on the table of the Parliament on December 15 1970 and March 22 1972 respectively
The said documents were forwarded to the State Government of Andhra Pradesh besides other State Governments for consideration by the State Legislatures before they passed a resolution authorising the Parliament to make a law in respect of urban immovable property
Their intention was to include the lands within the territorial area of an urban area and also its peripheral areas
The concept of ceiling on urban immovable property and the nature and content of urban agglomeration ultimately defined by Section 2n of the impugned Act was therefore fully under stood by the State Governments
 Some more observations in the above judgment read thus It is but axiomatic that once the legislatures of two or more States by a resolution in terms of Article 2521 abdicate or surrender the area ie their power of legislation on a State subject the Parliament is competent to make a law relating to the subject
It would indeed be contrary to the terms of Article 2521 to read the resolution passed by the State legislature subject to any restriction
The resolution contemplated under Article 2521 is not hedged in with conditions
In making such a law the Parliament was not bound to exhaust the whole field of legislation
It could make a law like the present Act with respect to ceiling on vacant land in an urban agglomeration as a first step towards the eventual imposition of ceiling on immovable property of every other description
 One other decision also arose from State of Andhra Pradesh
In Thumati Venkaiah s case Andhra Pradesh Land Reforms Ceiling on Agricultural Holdings Act which is analgous to Karnataka Land Reforms Act was challenged on the ground that the subject matter of the said law was covered by the topic of the legislation transferred to Parliament by the resolution under Article 252 passed by the Andhra Pradesh Legislative Assembly and that provisions of the Ceiling Act alone covered that subject and therefore Andhra Pradesh Land Reforms Ceiling on Agricultural Holdings Act was unenforceable
In this context Supreme Court again reiterated the same in the said decision
This Court proceeded to observe as under The effect of passing of resolutions by the Houses of Legislature of two or more States under this constitutional provision is that Parliament which has otherwise no power to legislate with respect to a matter except as provided in Articles 249 and 250 becomes entitled to legislate with respect to such matter and the State legislatures passing the resolutions cease to have power to make law relating to that matter
The resolutions operate as abdication or surrender of the powers of the State legislatures with respect to the matter which is the subject of the resolutions and such matter is placed entirely in the hands of Parliament and Parliament alone can then legislate with respect to it
It is as if such matter is lifted out of list II and placed in List I of the Seventh Schedule to the Constitution
 It was further observed that The result was that at the date when the Andhra Pradesh Act was enacted Parliament alone was competent to legislate with respect to ceiling on urban immovable property and acquisition of such property in excess of the ceiling and all connected ancillary or incidental matters and the Andhra Pradesh Legislature stood denuded of its power to legislate on that subject
 On the effect of ceiling this Court stated thus It will thus be seen that the Central Act imposes a ceiling on holding of land in urban agglomeration other than land which is mainly used for the purpose of agriculture and agriculture in this connection includes horticulture but does not include raising of grass dairy farming poultry farming breeding of live stock and such cultivation or the growing of such plants as may be prescribed by the Rules and moreover in order to fall within the exclusion the land must be entered in the revenue or land record before the appointed day for the purpose of agriculture and must also not have been specified in the master plan for a purpose other than agriculture
 Considering the contention that the whole of Andhra Pradesh Land Reforms Act was ultra vires this Court held thus The argument of the landholders was that the Andhra Pradesh Act sought to impose ceiling on land in the whole of Andhra Pradesh including land situate in urban agglomeration defined in Section 2n of the Central Act was an expansive concept and any area with an existing or future population of more than one lakh could be notified to be an urban agglomeration the whole of the Andhra Pradesh Act was ultra vires and void as being outside the legislative competence of the Andhra Pradesh Legislature
This argument plausible though it may seem is in our opinion unsustainable
It is not doubt true that if the Andhra Pradesh Act seeks to impose ceiling on land falling within an urban agglomeration it would be outside the area of its legislative competence since it cannot provide for imposition of ceiling on urban immovable property
But the only urban agglomerations in the State of Andhra Pradesh recognised in the Central Act were those referred to in Section 2nAi and there can be no doubt that so far as these urban agglomerations are concerned it was not within the legislative competence of the Andhra Pradesh Legislature to provide for imposition of ceiling on land situate within these urban agglomerations
It is however difficult to see how the Andhra Pradesh Act could be said to be outside the legislative competence of the Andhra Pradesh Legislature insofar as land situate in the other areas of the State of Andhra Pradesh is concerned
We agree that any other area in the State of Andhra Pradesh with a population of more than one lakh could be notified as an urban agglomeration under Section 2n A ii of the Central Act but until it is so notified it would not be an urban agglomeration and the Andhra Pradesh Legislature would have legislative competence to provide for imposition of ceiling on land situate within such area
No sooner such area is notified to be an urban agglomeration the Central Act would apply in relation to land situate within such area but until that happens the Andhra Pradesh Act would continue to be applicable to determine the ceiling on holding of land in such area
It may be noted that the Andhra Pradesh Act came into force on January 1 1975 and it was with reference to this date that the surplus holding of land in excess of the ceiling area was required to be determined and if there was any surplus it was to be surrendered to the State Government
It is therefore clear that in an area other than that comprised in the urban agglomerations referred to in Section 2nAi land held by a person in excess of the ceiling area would be liable to be determined as on January 1 1975 under the Andhra Pradesh Act and only land within the ceiling area would be allowed to remain with him
It is only in respect of land remaining with a person whether an individual or a family unit after the operation of the Andhra Pradesh Act the Central Act would apply if and when the area in question is notified to be an urban agglomeration under Section 2nAii of the Central Act
We fail to see how it can at all be contended that merely because an area may possibly in the future be notified as an urban agglomeration under Section 2nAii of the Central Act the Andhra Pradesh Legislature would cease to have competence to legislate with respect to ceiling on land situate in such area even though it was not an urban agglomeration at the date of enactment of the Andhra Pradesh Act
Undoubtedly when an area is notified as an urban agglomeration under Section 2nAii the Central Act would apply to land situate in such area and the Andhra Pradesh Act would cease to have application but by that time the Andhra Pradesh Act would have already operated to determine the ceiling on holding of land falling within the definition of Section 3j and situate within such area
It is therefore not possible to uphold the contention of the landholders that the Andhra Pradesh Act is ultra vires and void as being outside the Legislative competence of the Andhra Pradesh Legislature
 The above observations throw a flood of light on the question involved before us
It can be seen that entire power to legislate in respect of several matters falling under the wide scope of Entry 18 List II is not transferred
The power transferred is only in respect of imposition of ceiling on urban immovable property
There can be several topics in respect of the subject matters of regulatory legislations governing the lands or other immovable properties
The imposition of ceiling on owning property is one such topic and there can be laws regulating ceiling on owing the property relationship of lessor and lessee payment of rent manner of granting the lease conferment of ownership on the lessee etc
It is the concept of a welfare State which is the underlying object in such welfare legislations
When viewed from that angle it is axiomatic that imposition of ceiling on urban land is a distinct and independent subject as compared to imposition of ceiling on owning or holding agricultural land or any other kind of property which do not attract the Urhan Ceiling Act
Likewise it cannot be said that the pith and substance of the law governing the conferment of ownership of land on the tenant is a law regulating the imposition of ceiling on land holding
Equally it cannot be said that the pith and substance of the law imposing the ceiling on land holding covers the subject of conferring ownership of land on the tenant
These are two distinct powers and therefore the law making competence can be in two different legislative bodies
Consequently it is difficult to hold that the provisions of Chapter III of the Karnataka Land Reforms Act are outside the legislative competence of the State Legislature
In Calcutta Gas Company Proprietory Ltd vs State of West Bengal and others this Court observed as under The entries in the three Lists are only legislative heads or fields of legislation they demarcate the area over which the appropriate Legislatures can operate
It is also well settled that widest amplitude should be given to the language of the entries
But some of the entries in the different Lists 1 or in the same Lists may overlap and sometimes may also appear to be in direct conflict with each other
It is then the duty of this Court to reconcile the entries and bring about harmony between them
 It is well settled that the legislative power of the State has to be reconciled with that of the Parliament and that in their respective fields each is supreme
Even assuming that the State enactment has same effect on the subject matter falling within the Parliament s legislative competence that by itself will not render such law invalid or inoperative
In Kannan Devan Hills Produce Company Ltd vs The State of Kerala etc
  this Court held as under It seems to us clear that the State has legislative competence to legislate on Entry 18 List II and Entry 42 List III
This power cannot be denied on the ground that it has some effect on an industry controlled under Entry 52 List 1
Effect is not the same thing as subject matter
If a State Act otherwise valid has effect on a matter in List I it does not cease to be a legislation with respect to an entry in List II or List III
 However in the instant case we are clearly of the view that there is no conflict
The imposition of ceiling on urban immovable property is an independent topic and cannot be construed as to nullify the other subject left in the domain of the State Legislature under Entry 18 inasmuch as imposition of ceiling is a distinct and separately identifiable subject and does not cover the other measures such as regulation of relationship of landlord and tenant in respect of which the State Legislature has competence to legislate
Thus the one topic that is transferred in the resolution passed under Article 252 is distinct and separately identifiable and does not include the remaining topics under Entry 18 in respect of which the State alone has the power to legislate
An examination of the various provisions of the State Act makes this aspect clear
The object underlying the Act is to make a uniform law in the State of Karnataka relating to agrarian relations conferment of ownership on tenants ceiling on land holdings etc
Chapter II of the Act contains general provisions regarding tenancy deemed tenancy regulation of relationship between landlord and tenant etc
Sections 44 to 62 of Chapter III provide for vesting of tenanted lands in the State Government with effect from 1374 and conferment of occupancy rights on the tenants
Chapter V controls the eligibility to purchase or possess agricultural lands
Chapters VI to XI have many other provisions regarding agrarian reforms
We however find a ceiling provision under Section 452 providing for computation of the area in respect of which the tenant may be granted occupancy rights
But it is clear that ceiling on the area in this context is only for the purpose of Section 45
These are all topics regarding the conferment of occupancy rights on the respective tenants and they do not in any way conflict with the subject matter transferred to the Parliament by the resolution passed under Section 252
Consequently these Special Leave Petitions are dismissed
Petitions dismissed


Summary:
The constitutional validity of S15B of Gujarat Sales Tax Act S3 AAAA of Uttar Pradesh Sales Tax Act and S6A of the Andhra Pradesh General Sales Tax Act was challenged in the present Appeals Writ Petitions SLPs and Transferred case
S15 B of the Gujarat Sales Tax Act 1969 was introduced by Amendment Act 1986
It provided for levy of additional purchase tax on raw materials purchased by a manufacturing dealer in case he used the said raw material for the manufacture of other goods which he despatched to his own place of business or to his agent s place of business outside the State but within India
By the Amendment Act 1987 the section was substituted
Writ Petitions were filed before the High Court challenging the validity of unamended S15 B on the ground that it levied a consignment tax and hence was outside the competence of State Legislature
During the pendency of the writ petitions S15 B was substituted by an Ordinance
Subsequently the Gujarat Sales Tax Amendment Act 6 of 1990 was enacted in terms of and replacing the Ordinance
S15 B was given retrospective effect from 141986 the date on which it first came into force
In view of the said Amendment Act the Writ Petitions came to be dismissed as infructuous
A fresh batch of Writ Petitions were filed challenging the validity of substituted S15 B on the ground that it continued to be a consignment tax
The High Court having dismissed the Writ Petitions the matter has come up before this Court
Section 3 AAAA of the UP Sales Tax subjected the purchase Of goods liable to tax at the point of sale to the consumer to purchase tax payable by the purchasing dealer in a case where the selling dealer was not liable to pay the sales tax on such sale
Purchase tax was payable at the same rate as the sales tax
If however the purchasing dealer resold such goods within the State or in the course of inter State trade or commerce he was not liable to pay the purchase tax
While the Civil Appeals were pending in this Court as regards the validity of S3 AAAA the High Court while deciding some Writ Petitions applied the ratio in Good Year and held that section was ultra vires the legislative competence of the State Legislature
It held that under the said provision the taxable event was not the purchase of the goods by the purchasing dealer but the subsequent event namely use of the said goods in the manufacture of other goods and their despatch without effecting a sale within the State of UP to a place outside UP
To overcome this decision an Ordinance was issued which was later replaced by the UP Sales Tax Amendment Act 1992 the constitutional validity of which has been challenged before this Court
In the AP Sales Tax Act Section 6 A was inserted by the Andhra Pradesh General Sales Tax Amendment Act of 1976 with effect from 1976
The effect was that tax payable at sale point became tax payable on purchase point in certain circumstances
Writ Petitions were filed before the High Court challenging the validity of S6 A
It was contended that the notification issued under S9 of the Act exempted from tax certain goods which were sought to be taxed under S6 A and that S6 A was in fact a consumption or consignment tax and hence void
Unable to succeed before the High Court the assessees challenged the vires of the said section before this Court
Apart from challenging the constitutional validity of the above said provisions of the three State Sales Tax Acts the correctness of Good Year India Ltd vs State of Haryana  which invalidated certain purchase tax levied by the Haryana and Maharashtra Sales Tax Acts was also questioned by the Revenue before this Court
Dismissing the matters
this Court HELD By the Court S15B of the Gujarat Sales Tax 1969 S3AAAA of Uttar Pradesh Sales Tax Act 1948 and S6 A of the Andhra Pradesh General Sales Tax Act 1957 are intra vires the powers of the respective State Legislatures and hence valid
249 D Per BP Jeevan Reddy J for himself and V Ramaswami J 1
The necessity and significance of the delegated legislation is well accepted and needs no elaboration
They cannot travel beyond the purview of the Act
Where the Act says that Rules on being made be deemed as if enacted in this Act the position may be different
But where the Act does not say so the Rules do not become part of the Act
212 B Cl Halsbury s Laws of England 3rd
Edn Vol
36 referred to
Entry 54 of List 11 of Seventh Schedule to the Constitution must receive a liberal construction it being a legislative entry
The Legislature cannot be confined to only one form of levy
So long as the levy retains the basic character of a tax on sale the Legislature can levy it in such mode or in such manner as it thinks appropriate the well established principles in such matters being that reasonable construction should be followed and literal construction may be avoided if that defeats the manifest object and purpose of the Act
The Legislature must be presumed to know its limitations and act within those limits
Transgression must be clearly established and is not to be lightly assumed
214 H 215 A B 3
A person other than a registered dealer is not amenable to the discipline of the Sales Tax Act
He cannot indeed collect any tax and therefore will not make over or pay any tax
This the legislature is justified in presuming
If however in any case it is proved that such person has paid the tax the purchasing dealer will get an exemption to that extent
If a benefit is claimed by the purchasing dealer it is for him to prove the fact which enables him to claim the benefit
That burden cannot be passed on to any one else
222 C D 4
So far as registered dealers are concerned all that the purchasing dealer need to prove is that the said goods have already been or may be subjected to tax under State Act or Central Sales Tax Act
On this score there is no difficulty for the purchasing dealer
From the bill given by the selling dealer the purchasing dealers can prove the payment
Or he can simply prove as a matter of law that the said goods are liable to be taxed under any other provision of the Act or under the Central Sales Tax Act
222 E F GUJARAT SALES TAX ACTRULES 51
S15 B of the Gujarat Sales Tax Act read as a whole is applicable only to those goods which are used in the manufacture of other goods
The levy is upon the purchase price of raw material an not upon the value of the manufactured products
214 G H 52
Rule 14E of Gujarat Sales Tax Rules along with S15B of the Gujarat Sales Tax Act provide for set off etc in case the manufactured goods are sold within the State of Gujarat
It no doubt means that set off etc
is not available if the manufactured goods are disposed of otherwise than by way of sale or are consigned to manufacturer s own depots or to the depots or his agents outside the State of Gujarat
There is nothing objectionable in the State doing so
It cannot be said that by reading Rule 42 E into S15 B the levy becomes a consignment tax
213 E F Godrej  Boyce Mfg Co vs Commissioner of Sales Tax 1992 4 JTSC 317 and Andhra Sugars Ltd  Anr
v The State of Andhra Pradesh and Anr 21 STC 212 relied on
Goodyear India Ltd vs State of Haryana   dissented from
Ramkrishna vs State of Bihar Al
R 1963 SC1667 referred to
UP SALES TAX ACT 61
All that section 3 AAAA of the UP Sales Tax Act prior to its substitution in 1992 provided was i where the goods liable to tax at the point of sale to the consumer are sold to a dealer ii in circumstances in which no sales tax is payable by the sellers and iii the purchasing dealer does not re sell the said purchased goods within the State or in the course of inter state trade or commerce iv the purchasing dealer shall be liable to pay the tax which would have been payable by the seller
v If however it was proved that the said goods have already suffered tax under section 3 AAAA no purchase tax was payable under section 3 AAAA
It is obvious that the section did not speak of the purchased goods being used in the manufacture of other goods nor of the manner of disposal or despatch of such manufactured goods
The only two conditions stipulated which conditions are not to be found in the present Section 3 AAAA were that if the purchased goods are sold within the State or sold in the course of inter state trade or commerce the tax under it is not payable
This is for the simple reason that in both the contingencies the State would get the revenue in one case under the State Sales Tax Act and in the other case under the Central Sales Tax Act
The policy of the legislature is not to tax the same goods twice over
The fact that in a given case the purchased goods are consigned by the purchaser to his own depots or agents outside the State makes no difference to the nature and character of the tax
By doing so he cannot escape even one time tax upon the goods purchased which is the policy of the Legislature
The tax was directed towards ensuring levy of tax at least on one transaction of sale of the goods and not towards taxing the consignment of goods purchased or the products manufactured out of them
223 G H 224 A D 62
There is no vagueness in the provision viz sub sec2 of S3 AAAA of UP Sales Tax Act nor can it be said that it placed heavy and uncalled for burden upon the purchasing dealer or that it is not practicable for the purchaser to establish that the seller other than the registered dealer has paid the tax or not
222 B 63
The difficulty has really arisen because of the attempt to look to the provisions of Section 3 AAAA through the prism of Goodyear
There is a substantial and qualitative difference between the language employed in Section 9 of Haryana Act and Section 13 AA of Bombay Act on the one hand and in Section 3 AAAA of UP Act on the other as it stood prior to 1992 Amendment Act or for that matter as it stands now
These basic differences cannot be ignored
1224 E Constitutionality of Section 3 AAAA of the UP Sales Tax Act ought to be judged on its own language and so judged the Section both before and after the 1992 Amendment represents a perfectly valid piece of legislation
It is relatable to and fully warranted by Entry 54 of List 11 of the Seventh Schedule to the Constitution
224 F Goodyear India Ltd vs State of Haryana   dissented from
ANDHRA PRADESH GENERAL SALES TAX ACTRULES 71
The real object of clauses i to iii in Section 6 A of the AP Sales Tax Act is not to levy a consumption tax use tax or consignment tax but only to point out that thereby the purchasing dealer converts himself into the last purchaser in the state of such goods
The goods cease to exist or cease to be available in the State for sale or purchase attracting tax
In these circumstances the purchasing dealer of such goods is taxed if the seller is not or cannot be taxed
The tax imposed by S6 A cannot be described either as use tax consumption tax or consignment tax
It is a purchase tax perfectly warranted by Entry 54 of List ll of the Seventh Schedule to the Constitution
230 G  231 B 72
While exempting the sale or purchase of any specified class of goods the Government is empowered to specify whether the exemption operates at all points or any specified points in the series of sales or purchase of successive dealers
Several notifications have been issued the Government from time to time exempting certain dealers or exempting certain goods at the point of sale or purchase as the case may be
GOMs
1091 is one of them
The exemption is couched in qualified form
Thus it is not a general exemption but a qualified one
In the light of the specific scheme of Section 9 of the AP Sales Tax Act and the language of GOMs No 1091 the exemption at the point of sale by a particular category of persons cannot be construed as operating to exempt the purchase tax under Section 6 A of the Act as well much less in all cases
233 B C 73
Fresh milk was taxable as general goods under Section 5l of the Andhra Pradesh Sales Tax Act before it was amended by Amendment Act 4 of 1989
After the coming into force of the said Amendment Act it falls under Schedule VII which was introduced simultaneously with the said Amendment Act aud which takes in all goods other than those specified in first to sixth Schedules
Milk was subject to multi point tax prior to the said Amendment Act whereas after the said amendment it has become taxable only at single point namely point of first sale in the State
If fresh milk was not at all taxable under the Act there was no necessity to issue notifications exempting its sale in certain situations227 C D Goodyear India Ltd vs State of Haryana   dissented from
RATIO OF GOODYEAR RECONSIDERATION OF 81
The ingredients of Section 9 of Haryana Sales Tax Act are i a dealer liable to pay tax under the Act purchases goods other than those specified in Schedule B from any source in the State and ii uses them in the State in the manufacture of any other goods and iii either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured to a place outside the State in any manner otherwise than by way of sale in the course of an 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 
If all the above three ingredients are satisfied the dealer becomes liable to pay tax on the purchase of such goods at such rate as may be notified under Section 15
It applies only in those cases where a the goods are purchased referred to as material by a dealer liable to pay tax under the Act in the State b the goods so purchased cease to exist as such goods for the reason they are consumed in the manufacture of different commodities and c such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of an inter State sale or export sale
It is evident that if such manufactured goods are not sold within the State of Haryana but yet disposed of within the State no tax is payable on such disposition similarly where manufactured goods are despatched out of State as a result of an inter State sale or export sale no tax is payable on such sale
Similarly against where such manufactured goods are taken out of State to manufacturers own depots or to the depots of his agents no tax is payable on such removal
Goodyear takes only the last eventuality and holds that the taxable event is the removal of goods from the State and since such removal is to dealers own depotsagents outside the State it is consignment which cannot be taxed by the State Legislature
This is not correct
The levy created by the said provision is a levy on the purchase of raw material purchased within the State which is consumed in the manufacture of other goods within the State
If however the manufactured goods are sold within the State no purchase tax is collected on the raw material evidently because the State gets larger revenue by taxing the sale of such goods
The value of manufactured goods is bound to be higher than the value of the raw material
The State Legislature does not wish to in the interest of trade and general public tax both the raw material and the finished manufactured product
This is a well known policy in the field of taxation
But where the manufactured goods are not sold within the State but are yet disposed of or where the manufactured goods are sent outside the State otherwise than by way of inter State sale or export sale the tax has to be paid on the purchase value of the raw material
The reason is simple if the manufactured goods are disposed of otherwise than by sale within the State or are sent out of State ie consigned to dealers own depots or agents the State does not get any revenue because no sale of manufactured goods has taken place within Haryana
In such a situation the State would retain the levy and collect it since there is no reason for waiving the purchase tax in these two situations
239 B D 240 A D 82
In the case of inter State sale the State of Haryana does get the tax revenue may not be to the full extent
Though the Central Sales Tax is levied and collected by the Government of India Article 269 of the Constitution provides for making over the tax collected to the State in accordance with certain principles
Where of course the sale is an export sale within the meaning of Section 5 1 of the export sales the State may not get any revenue but larger national interest is served thereby
It is for these reasons that tax on the purchase of raw material is waived in these two situations
Thus there is a very sound and consistent policy underlying the provision
The object is to tax the purchase of goods by a manufacturer whose existence as such goods is put and end to by him by using them in the manufacture of different goods in certain circumstances
The tax is levied upon the purchase price of raw material not upon the sale price or consignment value of manufactured goods
Levy materialises only when the purchased goods raw material is consumed in the manufacture of different goods and those goods are disposed of within the State otherwise than by way of sale or are consigned to the manufacturing dealers  depotsagents outside the State of Haryana
Such postponement does not convert what is avowedly a purchase tax on raw material levied on the purchase price of such raw material to a consignment tax on the manufactured goods
Saying otherwise would defeat the very object and purpose of Section 9 and amount to its nullification in effect
The most that can perhaps be said is that it is plausible to characterise the said tax both as purchase tax as well as consignment tax
But where two interpretations are possible one which sustains the consititutionality andor effectuates its purpose and intendment and the other which effectively nullifies the provisions the former must be preferred according to all known canons of interpretation
240 E H 241 A C 83
In several enactments tax is levied at the last sale point or last purchase point as the case may be
The last purchase point in the State can be determined only when one knows that no purchase took place within the State thereafter
But that can only be known later
If there is a subsequent purchase within the State the purchase in question ceases to be the last purchase
Applying the logic of the dealers it would not be possible to tax any goods at the last purchase point in the State inasmuch as the last purchase point in regard to any goods could be determined only when the goods are sold later and not when the goods are purchased
241 F G 84
The scheme of Section 9 of Haryana Sales Tax Act is to levy the tax on purchase of raw material and not to forego it where the goods manufactured out of them are disposed of or despatched as the case may be in a manner not yielding any revenue to the State nor serving the interests of the nation and its economy
The purchased goods are put an end to by their consumption in manufacture of other goods and yet the manufactured goods are dealt with in a manner as to deprive the State of any revenue in such cases there is no reason why the State should forego its tax revenue on purchase of raw material
It would not be right to say that the tax is not upon the purchase of raw material but on the consignment of the manufactured goods
It is well settled that taxing power can be utilised to encourage commerce and industry
It can also be used to serve the interests of economy and promote social and economic planning
It is also not right to concentrate only on one situation viz consignment of goods to manufacturer s own depots or to the depots of his agents outside the State
Disposal of goods within the State without effecting a sale also stands on the same footing an instance of which may be captive consumption of manufactured products in the manufacture of yet other products
Once the scheme and policy of the provision is appreciated there is no room for saying that the tax is on the consignment of manufactured goods243 G H 244 A F 85
When the tax is levied on the purchase of raw material on the purchase price and not on the manufacture of goods or on the consignment value such a concept is unknown to Haryana Act or sale price of the manufactured goods the construction placed in Goodyear runs against the very grain of the provision and has the effect of nullifying the very provision
By placing the said interpretation Section 9 has been rendered nugatory
The tax purports to be and is in truth a purchase tax levied on the purchase price of raw material purchased by a manufacturer
247 A C 86S 13AA of the Bombay Sales Tax Act is substantially similar to Section 9 of Haryana Sales Tax Act
Whatever is said with respect to the Haryana provision applies equally to this provision
249 D Andhra Sugars Ltd  Anr
vs The State of Andhra Pradesh  Anr 21 STC 212 and State of Tamil Nadu vs Kandaswami 36 STC 191 relied on
Goodyear India Ltd vs State of Haryana   dissented from
Mukerian Papers Ltd vs State of Punjab   Explained
Murli Manohar and Company vs State of Haryana 1991 1 SCC 377 distinguished
Malabar Fruit Products Co vs STO 30 STC 537 approved
Hindustan Lever Ltd vs State of Maharashtra 79 STC 255 JK Steel Ltd vs Union of India Al
R 1970 SC 1173 Bata India Ltd vs State of Haryana 54 STC 226 Desraj Pushp Kumar Gulati vs State of Punjab 58 STC 393 Commissioner of Wealth Tax Bihar and Orissa vs Kirpa Shankar Daya Shankar Vorah  Yusuf Shabeer and Ors
vs State of Kerala and Ors
 1973 32 STC 359 and Income Tax Commissioners for City of London vs Gibbs 1942 10 ITR Suppl
121 HL referred to
Per Ranganathan J Concurring 1
The provisions of the UP and Gujarat Sales Tax Acts are clearly beyond challenge
The section in the UP Act is a very direct and simple provision to the effect that a tax will be levied on purchases made within the State in certain circumstances
The ambit of Entry 54 in the State List in the Constitution of India must be interpreted in the widest possible manner
The State has full powers to levy a tax with reference to sales or purchases inside the State and to a certain extent even sales made in the course of inter State trade or commerce
It certainly comprehends a power to tax the last sale in the State of certain goods
The tax is nothing but a tax on purchase pure and simple well within the scope of the State s Legislative power
It is true that one has to look at not merely the form but the substance of the statute and examine what exactly is the purport behind the levy but should not permit one s imagination to read a purpose or words into the statute which are not there
1198 C G 2
The Gujarat provision is more careful but makes a mention of the purchased goods being used for manufacture
But these are only words descriptive of a class of goods the purchase of which is sought to be brought to tax
Here again the intention of the legislature is to tax at purchase point a class of goods viz goods purchased by a manufacturer
It has no concern with what the manufacturer does with the manufactured goods
Presumably the idea is that the manufacturer is able to profit by adding value to the purchased raw material by utilising the infrastructure fillips or facilities provided in the State to encourage setting up of industries therein and so can afford to pay tax on the purchased raw materials
The concession provided by rule 42E of the Gujarat Sales Tax Rules is an independent provision relieving him and the public consuming the manufactured goods of additional burden where such goods are sold inside the State and get taxed on the added value
198 H 199 A B 3
The marginal title to the provisions under challenge indicates that their direct purpose is to levy a tax on purchases effected in the State in certain circumstances
The tax is couched as a tax on all goods in UP and on raw or processing materials and consumable stores in the State of Gujarat
It is designated as a purchase tax
It is levied on the turnover of such purchases
There is no reference in the UP statute to any condition for imposition of the tax except that it should be a sale to the consumer and in the State of Gujarat that it should be a purchase by a manufacturer
It is very difficult to read into these provisions any ulterior motive on the part of the States to levy a tax on use consumption or consignment in the guise of a purchase tax
The language of these two provisions is wholly different from that used in the Haryana and Bombay Acts
Even in the context of those Acts it may be equally plausible to consider the provisions either as a purchase tax or a tax on consignment
There is no such ambiguity in the language used in these provisions and the levy is only of a purchase tax
Such a levy is clearly within the domain of the State Legislature
199 C F 4
A person can be said to be the last purchaser of certain goods only when he consumes those goods himself or in case they are raw materialsstores and the like unless he uses them in the manufacture of other goods for sale
From this category have to be excluded cases where the manufactured goods are either sold in the State or sold in the course of inter State trade or commerce because in those two instances the State will be in a position to collect the tax in respect of the sale of the manufactured goods the sale price of which will also include the price of raw materials on which apriori the State could have only got a lesser amount of tax and to tax both would escalate the price and affect the consumer
Also excluded are cases where the manufactured goods are exported abroad to earn foreign currency
If these situations are borne in mind one would realise that the language used in the various clauses and phrases used in these legislations is only to levy a tax on the last purchase in the State and not with a view to levy a tax either on the use or consumption of raw materials or on the manufacture or production of manufactured goods or on the despatch of the goods manufactured from the State otherwise than by way of sale
In the Haryana case also the statute mentioned these several alternatives but a consideration of section 91b of the Haryana Act as well as of the corresponding clause of the Bombay Act were posed in isolation and emphasis placed on consignment being a sine qua non of the levy
This larger concept namely that these various alternatives are not set out in the section with a view to fasten the charge of tax at the point of use consumption manufacture production and consignment or despatch but in an attempt to make clear that what is sought to be levied is a tax on raw materials on the occasion of their last purchase inside the State had not been projected or considered
This approach would basically alter the parameters and remove the provision from the area of vulnerability
200 F H 201 A D 5
It is difficult to define a last purchase except with reference to the mode of the use of the purchased goods subsequent to that purchase and in that sense the levy of tax can crystallise only at a point of time when the goods have been utilised in a particular way
The mere fact that the purchase cannot be characterised as a last purchase except by reference to the subsequent utilisation of those goods cannot mean that the taxable event is not the purchase but something else
The more appropriate test would be to see whether the ambit of the power to levy a tax in respect of sale of goods is very wide and will cover any tax which has a nexus with the sale or purchase of goods including a last purchase in the State
In this view of the matter the levy under the AP Act is also within the legislative competence of the State  B 6
The conclusion reached as to the vires of the provisions under challenge is contrary to the conclusion reached in Goodyear on somewhat analogous provisions
No final conclusion is expressed as to whether the conclusion in Goodyear was rightly reached in the context of the provisions of the statutes considered there or would need a second look and fresh consideration in the context of what has been said now
There is no hesitation to accept the point of view now presented and which appeals to be more realistic appropriate and preferable particularly the view one way or the other would affect the validity of a large number of similar legislations all over India merely because it may not be consistent with the view taken in Goodyear
Consistency for the mere sake of it is no virtue
202 C D Distributors Baroda P Ltd vs Union of India 1985 155 ITR 120 SC relied on
Goodyear India Ltd vs State of Haryana   referred to