ition c Nos
655 69 of 1983
Under Article 32 of the Constitution of India
WITH WP C 8131 3382 8125 3082 8349 836852 8146 816682 9610 963082 3756 8783 3698 375583 947 96083 25086 CA Nos
4099 410382 10753 5783 10758 6083 1076183 WP C No 1283485 CA Nos
1280 8392 473791 430291 341091 348191 285091 317191 286691 3905 1291 4202 0591 7092 SLPC No 104589 TC C No 22088 WP C No 17592
G Ramaswamy Attorney General GL Sanghi BK Mehta Santosh Hegde RR Aggarwal Anil B Divan HN Salve K Parasaran Ms Suman Bose Dr Debi Pal AB Rohtagi RN Sachthey AC Gulati BB Sawhney Mrs Janaki Ramachandran section Ganesh Ravinder Narain SSukuraman DK Sinha JR Das J Gupta Ashok K Srivastava HS Munjral section Walia G Bansal DP Mukherjee R Mohan Mukul Mudgal A Subba Rao Ms Lata Krishnamurti MN Shroff D Dave Ms Deepa Dixit KJ John ATM Sampath P Sen GS Chatterjee Ashok Mathur M Haravu VJ Francis V Subramaniam PS Seetharaman Ms Indu Malhotra AS Bhasme RB Misra Dr BS Chauhan Ajay K Aggarwal Ms Radha Rangaswamy Anil Sachthey Badri Nath Sharma TVSN Chari B Kanta Rao and Ms Suruchi Aggarwal for appearing parties
The Judgments of the Court were delivered by RANGANATHAN J Taking a cue from the decision of this Court in Goodyear India Ltd vs State of Haryana   to which I was a party a contention has been raised in these appeals and writ petitions that corresponding provisions of the Gujarat Sales Tax Act the UP Sales Tax Act and the Andhra Pradesh General Sales Tax Act are ultra vires the powers of the State Legislature insofar as they seek to levy a purchase tax in certain circumstances
My learned brother Jeevan Reddy J has discussed the provisions and contentions elaborately and exhaustively in his judgment
It is unnecessary for me to set out over again the statutory provisions considered in Goodyear or those which are challenged in these petitions and appeals or the details of the decision in Goodyear as these have been discussed in great detail in the judgment of my learned brother
I however think that I owe it to myself to add a separate judgment as I was a party to Goodyear and explain my views on the provisions presently under challenge in the light of what has already been stated by me in Goodyear
So far as the UP Sales Tax Act is concerned I do not think that the impugned provision of the said Act viz S3AAAA as inserted in 1992 with retrospective effect from 141974 bears any comparison with the provisions that were considered in Goodyear
S3AAAA is a very simple provision
According to its marginal note its effect is the imposition of a liability to purchase tax on certain transactions
This liability is attracted in respect of goods which are liable to tax at the point of sale to the consumer
In other words the goods in question as such have run through their gamut of sales in the State
There will be no more sales in the State of the goods in that form which can be taxed by the State whether intra State or inter State or in the course of export
Such goods are then made liable to tax in the hands of a purchaser dealer cum consumer either because he purchases them from a registered dealer by whom tax is not payable or because he purchases them from a person other than a registered dealer ie a person who is not accessible to the revenue whose sales cannot be easily verified or from whom tax may not be easily recovered
To put it differently since the tax is at the point of sale to the consumer the Legislature in order to ensure that goods do not escape tax in the State altogether make the purchaser liable in respect of the last sale in the State of the goods in question if otherwise the sale of the goods have not borne tax earlier in the State
This on the face of it is a provision which seems to be perfectly within the legislative competence of the State Legislature
The argument urged on behalf of the assessees however is that no person can be said to be the consumer of the goods in the State unless he consumes the goods himself or utilises the goods where they are in the nature of raw material for the manufacture or production of other goods
It is urged therefore that as no sale can be postulated to be a sale to the consumer unless and until one of the above events happen the real taxable event is not the purchase of the goods but their consumption manufacture or production in the State or their despatch otherwise than by way of a sale outside the State whether in the same form or in a manufactured condition
It is therefore said that in substance the statutory provision is no different from the one considered by us in Goodyear and that the ratio of Goodyear will apply here equally
So far as the Andhra Pradesh provision is concerned the argument is the same with an added advantage to the assessees that the section brings out more emphatically their point of view
Under section 6 Ai purchase of goods from a registered dealer is subjected to tax because though the sale or purchase of that item of goods is generally liable to tax no tax became payable by the registered dealer on the sale because of the circumstances set out in section 5 or 6
This corresponds to section 3AAAAa of the UP Act
As against this clause ii of section 6 A deals with purchase of goods liable to tax from a person other than a registered dealer and imposes a liability to pay tax where the goods purchased are consumed by the purchaser either in the manufacture of other goods for sale or otherwise and the goods are disposed of otherwise than by way of sale or despatched outside the State otherwise than in the course of inter State trade or commerce
In other words the real taxable event for the charge under section 6 Aii it is said is not the purchase of goods but the consumption manufacture or consignment of the same or other goods outside the State
If that be so it is said the imposition is ultra vires the State Legislature on the principle of the decision in Goodyear
So far as the State of Gujarat is concerned the provisions of section l5B inserted by a retrospective amendment of 1990 are somewhat different
Cutting out certain words not relevant in the present context it provides that where a dealer being liable to pay tax under the Act purchases any taxable goods and uses them in the manufacture of taxable goods a purchase tax will be levied on the turnover of such purchases
Rule 42 E which was also framed wef 1590 provides that where the assessee is a registered dealer and the goods manufactured by him have been sold in the State of Gujarat he will be entitled to relief in respect of the purchase tax levied under section l5B
Here again it is argued the provision is tainted because it refers to manufacture of the purchased goods and the rule ensures that no purchase tax is levied if the manufactured goods are sold in the State itself in other words the levy comes in only if they are consigned outside the State attracting Goodyear
It will be seen at once that the three provisions under consideration vary from one another
S3AAAA of the UP Act does not make the tax conditional on the use or consumption of raw materials purchased or the manner of dealing with the goods manufactured out of such purchases of raw materials
Section 15B of the Gujarat Act is slightly different
It talks of the use of the goods purchased in the manufacture of other taxable goods but it does not make any reference to the consumption of the goods otherwise or their despatch or consignment
The Andhra Pradesh Act is more elaborate and deals with various situations in relation to the purchased goods
2Of these I am of opinion that the provisions of the UP and Gujarat Acts are clearly beyond challenge on the grounds put forward by the petitioners
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
I have explained earlier the reason why the incidence of tax in such sales is thrown under the Act on the consumer
The tax is nothing but a tax on purchase pure and simple well within the scope of the State s Legislative power
The attempt on behalf of the petitioners to undertake an analysis of what will eventually happen to the purchased goods where the purchaser is the consumer and on the basis thereof to suggest that the legislature really intends to tax consumption production or consignment is no doubt ingenious but farfetched artificial and unrealistic
It is true that one has to look at not merely the form but the substance of the statute and examine what exactly it is that the State purports to levy a tax in respect of but one should not permit one s imagination to read a purpose or words into the statute which are not there
The Gujarat provision is more careful but makes a mention of the purchased goods being used for manufacture
But as pointed out by Mukharji J in Goodyear 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 unlike the AP or Haryana Acts with what he 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 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
In my opinion there is considerable force in the substance of the contention of these States that these provisions only impose a tax on purchases
The marginal title to the provisions 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
As I have stated in my judgment in Goodyear even in the context of those Acts it may be equally plausible to consider the provision either as a purchase tax or a tax consignment
There is no such ambiguity in the language used in these provisioins
I have no doubt that so far as these provisions are concerned on the face of these acts the levy is only of a purchase tax
Such a levy is clearly within the domain of the State Legislature
The Andhra Pradesh Act however is different in its arrangement
The provisions of section 6 A of this Act are more or less analogous to the provisions of the Haryana Act considered in Goodyear
The question therefore arises as to whether the decision in Goodyear should be applied in the context of the Andhra Pradesh Act
On behalf of the State of Andhra Pradesh and indeed the other two States also it has been contended that Goodyear needs reconsideration
Our attention has been drawn to one angle of approach to the statutory provisions in question which had perhaps escaped our notice in the Goodyear case
It was pointed out that the sum and substance of these provisions is that no sale or purchase of any goods should go without being taxed atleast once in the State
Primarily the tax is levied on sales
Where a registered dealer sells his goods he will be liable to tax normally in respect of the taxable goods except where his turnover does not reach up to the minimum prescribed under the Sales Tax Act
Sometimes he may not pay any tax or may pay a concessional rate of tax on his sales because of certain declarations or certificates he may receive that the goods will be used inside the State
Again where goods are purchased from a person other than a registered dealer the tax at the sales point may escape actual taxation for many reasons such person may not be a dealer at all or being an unregistered dealer the State may not be able to ascertain his whereabouts and ensure that he is taxed or that the tax is collected
In cases where no sales tax is paid at the point of sale it becomes necessary for the State Legislature to provide that the tax will be met by the purchaser
Invariably in such cases the legislations attach levy of tax to the last purchase made in the State of a particular item of goods
Of course the legislation could have simply said that the last purchase in the State will attract tax unless the tax is payable or has been paid at one of the earlier stages of sale and could not have been objected to
But that type of legislative wording might lead to difficult questions as to the definition of the expression last purchase
That is why the section imposing purchase tax is worded in the manner in which it has been worded in the Andhra and Haryana Acts
As pointed out by the learned counsel for the assessees in the UP cases 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 a priori 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 91 b of the Haryana Act as well as of the corresponding clause of the Bombay Act were posed in isolation before us 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 before or considered by us
I am inclined now to think that this is an approach that basically alters the parameters and removes the provision from the area of vulnerability
It is true that 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 but will it be correct to say that the power of the State to levy a tax on sales or purchases cannot include a right or power to tax goods at the point of their first sale in the State or their last purchase in the State 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
What we are really concerned with in deciding the question of constitutional validity of the levy of a sales tax is to pose the question Is the tax levied one with reference to the sale or purchase of goods  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
This I think is a more appropriate test to be applied in these cases rather than the test of taxable event l which is somewhat ambiguous in the context
I am not inclined to agree that a tax on the sale or purchase of goods will cease to be so merely because the determination of its character as a last purchase would depend upon certain subsequent events which may be spread over a subsequent period of time
In this view of the matter I am inclined to agree with my learned brother Jeevan Reddy J that the levy under the Andhra Pradesh Act is also within the legislative competence of the State
I am quite conscious that the conclusion I have expressed here as to the vires of the provision impugned is contrary to the conclusion I reached in Goodyear on somewhat analogous provisions
I need not for the purposes of the present cases express any final conclusion as to whether the conclusion in Goodyear was rightly reached in the context of the provisions of the statutes there considered or would need a second look and fresh consideration in the context of what has been said here
But I should not I think hesitate to accept the point of view now presented to us which appeals to me as more realistic appropriate and preferable particularly when I see that 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 I took in Goodyear
Consistency for the mere sake of it is no virtue
If precedent is needed to justify my change of mind I may quote Bhagwati J as he then was in Distributors Baroda P Ltd vs Union of India  SC We have given our most anxious consideration to this question particularly since one of us namely PN Bhagwati J was a party to the decision in Cloth Traders  case
But having regard to the various considerations to which we shall advert in detail when we examine the arguments advanced on behalf of the parties we are compelled to reach the conclusion that Cloth Traders  case must be regarded as wrongly decided
The view taken in that case in regard to the construction of section 80M must be held to be erroneous and it must be corrected
To perpetuate an error is no heroism
To rectify it is the compulsion of the judicial conscience
In this we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce vs Delameter AMY at page 18 a judge ought to be wise enough to know that he is fallible and therefore ever ready to learn great and honest enough to discard all mere pride of opinion and follows truth wherever it may lead and courageous enough to acknowledge his errors
For the reasons above mentioned I agree with my learned brother and hold that the impunged provisions under all the three enactments are intra vires the powers of the concerned State Legislature
BP JEEVAN REDDY J Validity of provisions of several States Sales Tax enactments imposing purchase tax fall for our consideration in this group of appeals and writ petitions
Initially the matters arising from Andhra Pradesh writ petitions 655 66983 Hotel Balaji and Ors
vs State of Andhra Pradesh and Civil Appeal No 10753 5783 Hindustan Milk Food Manufacturers Limited vs State of Andhra Pradesh came up for hearing
During the course of hearing counsel for the petitionersappellants relied upon the decision of this court in Goodyear India Ltd vs State of Haryana 1990 76 STC 71 whereas the counsel for the State of Andhra Pradesh challenged the correctness of the said decision and pleaded for re consideration of the said judgment
It was then brought to our notice that a large number of matters coming from different States raising inter alia the question relating to the correctness or the ratio Or Goodyear were also posted before us
Indeed it was brought to our notice that a bench of three Judges comprising MN Venkatachaliah AM Ahmadi JJ
and one of us BP Jeevan Reddy J had directed two matters namely State of Punjab vs Industrial Cables India Ltd CA No 2990 NT of 1991 and the State of Punjab vs Hindustan Lever Ltd CA48091 raising a similar question to be posted before a Bench of three Judges
Those matters are also before us
It is in this manner that a large number of appeals and writ petitions arising from several States came to be posted before us for hearing
During the course of hearing however we found that on account of restriction of time it would not be possible for this Bench to hear all the matters
Accordingly we indicated to the counsel that we shall confine our attention only to three State enactments namely Gujarat
Uttar Pradesh and Andhra Pradesh
Counsel appearing in these matters have been heard fully
This judgment therefore deals only with the validity of Section 15B of the Gujarat Sales Tax Act Section 3 AAAA of Uttar Pradesh Sales Tax Act and Section 6 A of the Andhra Pradesh Sales Tax Act
We shall first take up Section 15B of the Gujarat Sales Tax Act
PART 11 GUJARAT Though several appeals and writ petitions from this State are placed before us it is sufficient to refer to the facts in Civil Appeal No3410 NT of 1992 as representative of the facts in all the matters
This appeal is preferred by the writ petitioner against the judgment of a Division Bench of the High Court of Gujarat upholding the constitutional validity of Section 15B of the Gujarat Sales Tax Act 1969 as substituted by the Gujarat Sales Tax Amendment Act 6 of 1990
The Gujarat Sales Tax Act 1969 being Act No 1 of 1970 came into effect on and from May 61970 replacing the Bombay Sales Tax Act which was in force in the State of Gujarat till then
Section 15 of the Act levied purchase tax on purchases made by a dealer from a person who is not a registered dealer
Section 15A was introduced by amendment Act 7 of 1983
It provided for levy of concessional rate of tax in respect of purchase of raw material made by Recognised dealers who are necessarily manufacturers provided the goods raw material purchased by them fell in Schedule II or III other than prohibited goods
Section 15B was introduced by Amendment Act Or 1986
It provided for levy of an additional purchase tax on raw material 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 situated outside the State but within India
By an Amendment Act made in 1987 the Section was substituted
There was however no substantial change in the Section
Following upon the decision of this court in Goodyear a batch of writ petitions was filed in the Gujarat High Court challenging the validity of Section 15B on the ground that in truth and effect it levied a consignment tax and hence was outside the competence of the State Legislature
While the said writ petitions were pending Section 15B was substituted by an Ordinance being Ordinance No3 of 1990 issued on 2041990
Subsequently the Gujarat Sales Tax Amendment Act 6 of 1990 was enacted in terms of and replacing the Ordinance
The substituted Section 15B was given retrospective effect on and from April 1 1986 the date on which Section 15B first came into force
In view of the said Amendment Act the batch of writ petitions challenging Section 15B as it stood prior to its substitution by the 1990 Amendment Act were dismissed as having become infructuous
A fresh batch of writ petitions followed questioning the validity of the substituted Section 15B again on the ground that it continued to be in essence a consignment tax
The contention was that Section 15B must be read along with Rule 42E of the Gujarat Sales Tax Rules inserted by Notification dated 1590 and if so read the position is the same as was obtaining prior to 1990 Amendment
Yet another ground urged was that the levy imposed by the new provision is really in the nature of an excise duty and thus beyond the competence of the State legislature
The assessees placed strong reliance upon the decision of the Division Bench of the Bombay High Court in Hindustan Lever Ltd vs State of Maharashtra 79 STC 255 where the petitioners say construing a similar provision in the Bombay Sales Tax Act it was held that the levy created by the said provision is in the nature of an excise duty
Disagreeing with the Bombay judgment the High Court dismissed the writ petitions
Counsel for the appellantassessee urged that Section 15B as substituted in 1990 is no different from the earlier provision
The basic scheme of the earlier provision is now split into two provisions namely substituted Section 15B and Rule 42E which Rule was inserted into the Rules simultaneously
This is a clear instance of colourable legislation and ought not to be countenanced by this court
The High Court was in error in justifying the same on the theory that just as it is open to an assesses to reduce the tax burden by resorting to legitimate tax planning similarly it is open to a legislature to make an appropriate enactment to remain outside the mischief pointed out by the court
It is submitted that as rightly held by the Bombay High Court construing a similar provision the levy created by the substituted Section 15B is really upon the manufacture of goods and therefore not a tax referable to Entry 54 of List II of the Seventh Schedule to the Constitution
On the other hand it is argued by F Sri BK Mehta learned counsel appearing for the State of Gujarat that the Legislative competence of the Gujarat Legislature to enact Section 15B ought to be determined on its own language and not with reference to a Rule made by the Government of Gujarat as the delegate of the legislature
He submitted that on its own language Section 15B levies a pure and simple purchase tax on raw material purchased by a manufacturer
It is unconcerned with what happens to the manufactured goods
For the purpose of Section 15B it is immaterial whether the manufactured goods are sold inside the State or despatched to a place outside the State of Gujarat or are dealt with or disposed of otherwise
The principle of Goodyear has absolutely no application to this provision
Counsel also submitted that when the tax is upon the purchase price of the raw material and is relatable to the act of purchase it cannot he held to be an excise duty which is levied on the act of manufacture and is levied with reference to the value of such manufactured goods
For a proper appreciation of the contentions arising herein it would be appropriate to notice a few relevant provisions of the Act
Clause 16 in Section 2 defines the expression manufacture  in the following words manufacture with all its grammatical variations and cognate expressions means producing making extracting collecting altering ornamenting finishing or otherwise processing treating or adapting any goods but does not include such manufactures or manufacturing processes as may be prescribed
 Clauses 35 and 36 define the expressions turn over of purchases and turn over of sales
It would be enough to notice the definition of the expression turn over of purchases
It reads turn over of purchases  means the aggregate of the amounts of purchase price paid and payable by a dealer in respect of any purchase of goods made by him during a given period after deducting the amount of purchase price if any refunded to the dealer by the seller in respect of any goods purchased from the seller and returned to him within the prescribed period
 Section 3 is a charging section
Section 15 which levied purchase tax on purchase of certain goods from a person who is not a registered dealer read as follows at the relevant time 15 Purchase tax payable on certain purchases of goods
Where a dealer who is liable to pay tax under this Act purchases any goods specified in Schedule II or III from a person who is not a Registered dealer then unless the goods so purchased are resold by the dealer
there shall be levied subject to the provisions of section 9
i in the case of goods specified in Schedule 11
a purchase tax on the turnover of such purchase at the rate set out against them in that Schedule and ii in the case of goods specified in Schedule III a purchase tax on the turnover of such purchase at a rate equivalent to the rate of sales tax act out against them in that Schedule
 The said Section has however been substituted by Gujarat Amendment Act 9 of 1992 with effect from 141992 but since the Amendment is not a retrospective one it is unnecessary to notice the amended provision
Section 15A provides for a concessional rate of tax in the case of purchases of raw material by a recognised dealer provided the goods purchased are those specified in Schedule II or III other than the prohibited goods and he issues a certificate contemplated by Section 131B
Prior to the Amendment Act 9 of 1992 Section 15A read as follows 15A Purchase tax payable on purchases of goods by certain dealers where i a recognised dealer purchases any goods specified in Schedule II or III other than prohibited goods under a certificate given by him under clause B of sub section I of section 13 or ii a commission agent holding permit purchases any goods specified in Schedule II or III other than prohibited goods on behalf of his principal who is recognised under a certificate given by him under clause C of sub section 1 of section 13 there shall be levied a purchase tax on the turnover of such purchase at the rate of two paise in the rupee
 8 Since the Amendment of this provision in 1992 is also not retrospective it is unnecessary to notice the same
We may now set out Section 15B both as it obtained prior to Amendment Act 6 of 1990 and as substituted thereby
Prior to Amendment it read thus Where any dealer liable to pay tax under this Act uses any goods other than declared goods purchased by him or through commission agent as raw or processing materials or consumable stores irrespective of whether such goods are prohibited goods or not in the manufacture of taxable goods and despatches any of the goods so manufactured to his own place to business or to his agents place of business situate outside the State hut within India such dealer will be liable to pay in addition to any tax paid or payable under other provisions of this Act a purchase tax at the rate of four paise in the rupee on the purchase price of such raw or processing materials or consumable stores used in the goods so manufactured and despatched and accordingly he shall include the purchase price thereof in his turnover of purchases in his declaration or return under section 40 which he is to furnish next thereafter
Provided that where the raw materials so used is bullion or specie the purchase tax payable on such bullion or specie under this section shall not exceed the aggregate of the rates of sales tax and the general sales tax payable on bullion or specie
 After it is substituted in 1990 with retrospective effect from 141986 this Section reads thus Where a dealer who being liable to pay tax under this Act purchases either directly or through a commission agent any taxable goods not being declared goods and uses them as raw or processing materials or consumable stores in the manufacture of taxable goods then there shall he levied in addition to any tax levied under the other provisions of this Act a purchase tax at the rate of a two paise in a rupee on the turnover of such purchases made during the period commencing on the 1st April 1986 and ending on the 5th August 1988 and b four paise in rupee on the turnover of such purchases made at any time after the 5th August 1988 provided that where the raw materials purchased for use in the manufacture of goods are bullion or specie the rate of purchase tax on the turnover of purchases of such raw materials shall not exceed the aggregate of the rates of sales tax and general sales tax leviable on bullion or specie under Entry I in Schedule III
 Inasmuch as strong reliance is placed by the assesseeappellants upon Rule 42E inserted by GSR 1090 64 TH dated 151990 it would he appropriate to read the said Rule here 42 E Drawback set off or refund of purchased Tax under section 15B 42 E
In assessing the purchase tax levied under section 15B and payable by a dealer hereinafter referred to as the assessee the Commissioner shall subject to conditions of rule 47 in so far as they apply and further conditions specified below grant him a draw back set off or as the case may be refund of the whole of the purchase tax paid in respect of purchase of goods effect on and from the 1st April 1986 used by him as raw materials processing materials or consumable stores in the manufacture of taxable goods
 Conditions 1 the assessee is a registered dealer 2 the goods purchased are taxable goods other than declared goods 3 the said goods have been used by the assessee within the State as raw materials or processing materials or consumable stores in the manufacture of taxable goods 4 the goods so manufactured have been sold by the assessee in the State of Gujarat
 In view of the retrospective amendment of Section 15B it may not be necessary to refer to Section 15B as it obtained prior to the 1990 amendment except to point out that in material particulars it was similar to Section 13AA of Bombay Sales Tax Act which was considered in Goodyear and held to he outside the legislative competence of the State legislature
The correctness of the ratio in Goodyear has been discussed by us in Part V Section 15 makes the purchaser liable to pay the tax provided thereunder in case he purchases the goods mentioned in Schedule II and III from a person who is not a registered dealer
If however the goods so purchased are resold by him he is not liable to pay the said tax
Section 15A applies only to Recognised dealers
A recognised dealer is defined in section 32 in short it means a dealer who is a manufacturer and whose turnover of sales or purchases exceeds the specified limit
If the recognised dealer purchases goods specified in Schedule II or III other than prohibited goods and issues a certificate contempleted by Section 13 1B he is entitled to pay purchase tax on a concessional rate
Then comes Section 15B which provides for levy of an additional purchase tax
An analysis of the Section yields the following ingredients i where a dealer who being liable to pay tax under Act ii purchases either directly or through a commission agent iii any taxable goods not being declared goods and iv uses them as raw or processing materials or as consumable stores in the manufacture of taxable goods v then there shall be levied in addition to any tax levied under other provisions of the Act a purchase tax at the rates specified
It is thus clear that section 15B does not speak of nor does it refer in any manner to the movement sale or disposal of manufactured goods
According to this section it is immaterial whether the manufactured goods are sold within the State or dealt with in some other manner
It is equally immaterial whether the manufacturer consigns them to his own depots or the depots of his agents outside the State
Therefore the ratio of Goodyear keeping aside its correctness for the time being has absolutely no application
The Haryana and Bombay provisions considered in the said decision spoke of the manufactured goods being disposed of within the State otherwise than by way of sale or despatched out of State otherwise than in the course of inter State trade or commerce or in the course of export within the meaning of Section 51 of the 
Similarly the Bombay provision spoke of the manufactured goods being sent to the depots of the manufacturer or his agents outside the State of Maharashtra
It was these features which weighed with this court in characterising the tax as one in the nature of a consignment tax This aspect has been dealt with in Since the said feature is absent in the impugned provision we hold agreeing with the High Court that the tax imposed by Section 15B cannot be characterised as a consignment tax
The main contention or the appellants however is that Section 15B should not be read in isolation but in conjunction with Rule 42E which was introduced in the Rules simultaneously with the amendment of Section 15B and which Rule indeed supplements Section 15B
They say that if both the provisions are read together the effect and consequence is the same as that of Section 15B as it obtained prior to 1990 amendment which means the tax is really upon the consignment of manufactured goods
We shall first notice what Rule 42E provides
It says that in assessing the purchase tax levied under Section 15B the assessee shall be granted a drawback set off or as the case may be refund of the whole of the purchase tax paid in respect of purchase of goods effected on or after 141986 and which goods have been used by him as raw material processing material or as consumable stores in the manufacture or taxable goods subject however to the conditions prescribed in the said Rule and further subject to the conditions specified in Rule 47 in so far as they are applicable
The four conditions specified in the Rule 42E are 1 the assessee is a registered dealer 2 the goods purchased are taxable goods other than declared goods 3 the said goods have been used by the assessee within the State as raw materials or processing materials or consumable stores in the manufacture of taxable goods 4 the goods so manufactured have been sold by the assessee in the State of Gujarat
Condition No 4 emphasised by the assessees says that the benefit of set offdrawbackrefund shall be available only if the manufactured goods are sold within the State of Gujarat
According to them it means that where the manufactured goods are consigned by the manufacturer to his own depots or to his agents depots outside the State of Gujarat the benefit of drawback etc
will not be available which means that purchase tax shall be levied upon the purchase of raw material
This say the appellants is precisely what the old Section 15 B provided for
According to them the present Section 15B read with Rule 42E is nothing but a re incarnation of Section 15B as it stood prior to 1990 Amendment Act and falls squarely within the ratio of Goodyear This argument raises in turn the question how far is it permissible to refer to the Rules made under an Act while judging the legislative competence of a legislature to enact a particular provision The necessity and significance of the delegated legislation is well accepted and needs no elaboration at our hands
Even so it is well to remind ourselves that Rules represent subordinate legislation
They cannot travel beyond the purview of the Act
Where the Act says that Rules on being made shall be deemed as if enacted in this Act the position may be different
It is not necessary to express any definite opinion on this aspect for the purpose of this case
But where the Act does not say so the Rules do not become part of the Act
Sri Mehta relies upon the following statement of law in Halsbury s Laws of England 3rd Edn Vol 36 at page 40 Where a statute provides that subordinate legislation made under it is to have effect as if enacted in the statute such legislation may be referred to for the purpose of construing a provision in the statute itself
Where a statute does not contain such a provision and does not confer any power to modify the application of the statute by subordinate legislation it is clear that subordinate legislation made under the statute cannot after or vary the meaning of the statute itself where it is unambiguous and it is doubtful whether such legislation can be referred to for the purpose of construing an expression in the statute even if the meaning of the expression is ambiguous He says that this statement of law has been referred to with approval by Hegde J in his opinion in JK Steel Ltd v Union of India AIR 1970 SC 1173
Though the opinion of Hegde J is a dissenting one he submits the majority has not held to the contrary on this aspect
He also relies upon the English decisions referred to in the opinion of Hegde J and points out that no decision of this court has expressed any opinion on the subject a fact noted by Hegde J He commends the view taken by Hegde J for our acceptance
Sri Mehta points out further that Section 86 which confers the Rule making power upon the Government does not say that the Rules when made shall be treated as if enacted in the Act
Being a rule made by the Government he says Rule 42E can be deleted amended or modified at any time
In such a situation the legislative competence of a legislature to enact a particular provision in the Act cannot be made to depend upon the Rule or Rules as the case may be obtaining at a given point of time he submits
We are inclined to agree with the learned counsel
His submission appears to represent the correct principle in matters where the legislative competence of a legislature to enact a particular provision arises
If so the very foundation of the appellants  arguments collapses
Even if we agree with the appellants and read Rule 42E along with Section 15B they cannot succeed
Rule 14E provides 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 of his agents outside the State of Gujarat
What in effect the State says is this Raw material when purchased is taxable but I won t tax the raw material if you sell the goods manufactured out of such raw material within the State because I derive larger revenue there I do not want to tax both the raw material and the manufactured goods in the interest of trade and public
But if you dispose of the manufactured goods in some other manner I will tax the purchase of raw material because there is no reason why I should forego the purchase tax due on raw material when I am not getting any revenue from your method of disposal or despatch of manufactured products
 There is nothing objectionable in the State saying so
It can indeed rely on the principle of the decision of this court in Godrej  Boyce Mfg Co vs Commissioner of Sales Tax reported in 1992 4 JT SC 317
It is difficult to see how can it be said that by reading Rule 42E into Section 15B the levy becomes a consignment tax
In any event the ratio of Goodyear cannot be accepted as good law for the reasons mentioned in part V
We are equally not satisfied with the argument that the Gujarat legislature has resorted to a device a stratagem to circumvent the decision or this court or that it is an instance of fraud on power what is sometimes referred to as colourable legislation 
That a legislature is empowered to amend a provision to remove the defect pointed out by a court is well accepted
So far as the Gujarat Act is concerned it was never the subject matter of an adverse decision either by this court or the Gujarat High Court
Writ Petitions were no doubt pending challenging the validity of Section 15B as it then stood
It was perfectly open to the Legislature to act to set its house in order to obviate a possible adverse verdict applying the ratio of Goodyear
The question is whether the provision now enacted with retrospective effect is beyond the legislative competence of Gujarat Legislature It not no further question arises
So far as the retrospectivity given to Section 15B by the 1990 Amendment Act is concerned it is hardly open to doubt in the light of several decisions of this court commencing from Ramakrishna vs State of Bihar  This is not even a case where the old provision was struck down by a court
The period or retrospectivity covers only the period during which Section 15B has been in force
The levy was already there
In any event in view of our conclusion that Goodyear does not represent the correct position in law this aspect has really no relevance
It is then contended that the levy is really in the nature of excise duty or use tax inasmuch as it attaches not on purchase of goods but on their use in manufacture of other goods
This argument in our opinion misses the true nature of tax
It is an additional tax on the purchase of raw material used in manufacture of other goods
A certain concession is given to manufacturers recognised dealers in purchase of certain types of raw material Section 15A an additional purchase tax is levied under Section 15B and in certain situations this tax is refunded or set off as the case may be under Rule 42 E
All these provisions are intended to encourage industry and to derive revenue at the same time
Counsel for the assessees placed strong reliance upon the word then occurring in the section and its placement
He emphasised that the tax is payable only when the dealer 1 purchases the goods and 2 uses them in the manufacture of other goods
It is not possible to agree
Heading of Section 15B is Purchase tax on raw or processing materials or consumable stores used in manufacture of goods in certain cases
 The Section 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 and not upon the value of the manufactured products
Entry 54 of List II must receive a liberal construction 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
As affirmed by Mukharji J in Goodyear the well established principles in such matters is 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 he presumed to know its limitations and acted within those limits
Transgression must be clearly established and is not lo be lightly assumed
For the very same reasons the argument that it is a use tax also fails
In essence the provision is akin to the one considered by this court in Andhra Sugars Ltd  Anr
vs The State of Andhra Pradesh  Anr 21 STC 212
For the above reasons the appeals and writ petitions are dismissed with no order as to costs
PART III UTTAR PRADESH These Civil Appeals and Writ Petition are filed by the Tribeni Tissues Limited Varanasi Uttar Pradesh
The Appeals are preferred against the Judgment of a learned Single Judge of Allahabad High Court allowing Sales Tax Revisions No325 327 and 328 of 1989 preferred by the Commissioner of Sales tax Uttar Pradesh against the orders of the Sales tax Appellate Tribunal
The assessment years concerned are 1978 79 to 1981 82
The appellant is a dealer registered under the UP Sales tax Act having an office at Varanasi
It has a paper mill at Calcutta
The appellant purchases sun hemp raw jute old hemp rope cuttings Old Jute rope cuttings and jute cuttings etc
at Varanasi and sends them to the paper mill at Calcutta for being used as raw material
These purchases are made by the appellant from farmers kabadis  and other persons who are not registered dealers
The turnover relating to such purchases was subjected to purchase tax under section 3 AAAA by the assessing authorities which the appellant objected to
The Tribunal by a majority of 21 held in favour of the appellant against which the Commissioner preferred revisions before the High Court
Section 3AAAA read as follows at the relevant time
3 AAAA
Liability to purchase tax on certain transactions Where any goods liable to tax at the point of sale to the consumer are sold to a dealer but in view of any provision of this Act no sales tax is payable by the seller and the purchasing dealer does not resell such goods within the State or in the course of inter State trade or commerce in the same form and condition in which he had purchased them the purchasing dealer shall subject to the provisions of Section 3 be liable to pay tax on such purchases at the rate at which tax is leviable on sale of such goods to the consumer within the State Provided that if it is proved to the satisfaction of the assessing authority that the goods so purchased had already been subjected to tax or may be subjected to tax under Section 3 AAA no tax under this section shall be payable
 The section 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
The expression goods liable to tax at the point of the sale to the consumer is explained in Section 3 AAA
Section 3A prescribes the rates of tax
As it stood at the relevant time sub sections 1 and 2 prescribed different rates for different goods
Sub section 2A which alone is relevant herein read as follows 3A 2A The turnover in respect of goods other than those referred to in sub sections 1 and 2 shall be liable to tax at the point of sale by the manufacturer or importer at the rate of seven per cent provided that the State Government may from time to time by notification in the Gazette modify the rate or point or tax on the turnover in respect of any such goods with effect from such date as may be notified in that behalf so however
that the rate does not exceed seven per cent
The goods concerned herein according to both the parties fall within sub section 2A of Section 3A
The State Government issued a notification dated 3051975 in terms of and as contemplated by the proviso to sub section 2A of Section 3 A declaring that with effect from June 1 1975 the turnover in respect of goods specified in column 2 of the Schedule to the notification shall be liable to tax at the point of sale and at the rate specified respectively in columns 3 and 4 thereof
The Schedule in so far as relevant may be set out SCHEDULE M  stands for sale by manufacturer in Uttar Pradesh
I  stands for sale by the Importer in Uttar Pradesh
Description of goods Point at which Rate of tax No tax shall be levied Items No1 to 14 omitted as unnecessary
Old discarded unservice able or obsolete machinery stores or vehicles including waste products except cinder coal ash and such items as are included in any other notification issued under the Act
Item Nos 16 to 25 omitted as sale to consumer 5 per cent unnecessary 26
Jute and Hemp Goods M or I 4 per cent The controversy before the High Court was a limited one
It was whether the said goods will fall under the entry at SI
No 15 of the notification dated 30th May 1975 as contended by the learned standing counsel for the State of Uttar Pradesh or under SI
No 26 as Jute and Hemp goods under the notification dated 1st October 1975 as urged on behalf of the assessee Quoted from the judgment of the High Court The learned Judge held that the goods fall under item No15 and accordingly allowed the revisions filed by the Commissioner
The correctness of the Judgment of the High Court is questioned in these Civil Appeals
While the Civil Appeals were pending in this Court a Division Bench of the Allahabad High Court held in CMWPNo168 of 1983 and batch decided on 3rd April 1991 that Section 3 AAAA was ultra vires the legislative competence of the legislature of Uttar Pradesh and therefore void
The Division Bench followed and applied the ratio of Goodyear and held that under the said provision the taxable event is not the purchase of the goods by the purchasing dealer but the subsequent event namely use of said goods in the manufacture of other goods and their despatch without effecting a sale within the State of Uttar Pradesh to a place outside the Uttar Pradesh
To get over the said decision and to remove the defect pointed out therein the Governor of Uttar Pradesh issued an Ordinance being Ordinance No 45 of 1991 on 12th December 1991 substituting Section 3 AAAA in its entirety with effect from April 1 1974
The said Ordinance has since been replaced by UP Sales tax Amendment Act 8 of 1992
Section 3 AAAA as substituted by the aforesaid Amending Act reads thus 3 AAAA
Liability to purchase tax on certain transactions
1 Except as provided in sub section 2 and subject to the provision of Section 3 every dealer who purchases any goods liable to tax at the point of sale to consumer a from any registered dealer in circumstances in which no tax is payable by such registered dealer shall be liable to pay tax on the purchase price of such goods at the same rate at which but for such circumstances tax would have been payable on the sale of such goods b from any person other than a registered dealer whether or not tax is payable by such person shall be liable to pay tax on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods
2 Exemption shall be granted in the tax payable under sub section 1 to the extent of the amount or tax a to which the goods purchased from a registered dealer have already been subjected or may be subjected under any provision of this Act or the  b already paid in respect of the goods purchased from any person other than a registered dealer c on the sale of goods liable to be exempted under Section 4 A d to which the sale of dressed hides and skins or tanned leather and ginned cotton obtained from raw hides and skins and raw cotton so purchased or rice obtained from paddy so purchased during the period commencing on September 2 1976 and ending with April 30 1977 are liable under any provision of this Act or the 
 Writ Petition No 175 of 1992 is preferred questioning the constitutional validity of the said provision
We shall first deal with Civil Appeals
According to the statement of facts contained in the Judgment of the High Court the appellant purchased sun hemp raw jute old hemp rope cuttings old jute rope cuttings and jute cuttings etc
 Item No 26 of the notification dated October 1 1975 speaks of jute and hemp goods
The appellant inter alia purchased sunhemp and raw jute
Certainly they do not fall under item 26 of the Schedule
Coming to old hemp rope cuttings old jute rope cuttings and jute cuttings they fall by their very nature more properly under item 15 because admittedly they are discarded worn out and waste material
It would he rather odd to call them jute the hemp goods in the presence of item 15
The High Court was therefore justified in holding that the goods purchased by the appellant are properly relatable to item 15 and not to item 26 of the notification
The learned counsel for the appellant urged that item 15 is confined only to old discarded unserviceable and obsolete stores which in the context means stores maintained by a factory or industry
Having regard to the language of item 15 he submitted
it does not take in old discarded material coming from other sources We see no warrant for this restricted reading of item 15
Be that as it may once the said goods do not fall under item 26 as held by us they must fall under item 15 since it is not suggested that there is any other item which takes in these goods
The Civil Appeals accordingly fail and are dismissed
No costs
Writ Petition No 175 of 1992
In view of the fact that Section 3 AAAA has been substituted by the 1992 Amendment Act with retrospective effect from April 1 1974 it is not really necessary for us to deal at any length with the Section as it stood prior to the said amendment or with the correctness of the judgment of the Division Bench of the Allahabad High Court declaring the same as beyond the legislative competence of the UP Legislature
Suffice it to say that the decision of the Division Bench closely follows and applies the ratio of Goodyear which according to us does not represent the correct position in law as explained in Part V Coming to Section 3 AAAA as it now stands an analysis of the Section yields the following ingredients A i A dealer who purchases any goods liable to tax at the point of sale to the consumer ii from any registered dealer in circumstances in which no tax is payable by such registered dealer iii the purchasing dealer shall he liable to pay tax on the purchase price of such goods at the same rate at which the tax would have been payable on the sale of such goods
B i A dealer who purchases any goods liable to tax at the Joint of sale to consumer ii from any person other than a registered dealer whether or not such person is liable to pay the tax on such sale iii the purchasing dealer shall be liable to pay tax on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods
The purchasing dealer is however entitled to be exempted from the tax payable under the above two heads to the extent of the amount of tax mentioned in clauses a b c and d of sub section 2
Clause a speaks of the tax paid or payable under any of the provision of UP Act or CST Act
Clause b speaks of the tax already paid if any in respect of goods purchased from any person other than a registered dealer
Clause c refers to sale of goods entitled to exemption under section 4A and clause d refers to sale of dressed hides and skins
In short the scheme of the section is this I if a dealer purchases the goods liable to tax at the point of sale to the consumer from any registered dealer who is not liable to pay tax on such sale the purchasing dealer shall pay such tax
If however the purchasing dealer establishes that the goods purchased by him have already been subjected to or may be subjected to tax under the UP Act or  he will get an exemption to that extent
2 If the said goods are purchased from a person other than a registered dealer the purchasing dealer shall pay the tax payable on sale of such goods
If however he proves that tax payable has been paid either wholly or partly by the seller the tax payable by the purchasing dealer shall be exempted to that extent
3 Similar exemption will be available to the purchasing dealer in case he establishes any of the facts mentioned in clauses c and d of sub section 2
The central idea is that no transaction of sale of goods taxable at the point of sale to consumer should go untaxed
Either the seller pays the tax or the purchaser pays
It is for achieving this central purpose that Section 3 AAAA has been enacted providing for several situations
It would be immediately evident that section that Section 3 AAAA does not speak of and does not refer in any manner to the user of the goods purchased
It is immaterial whether the goods purchased are used in the manufacture of other goods or dealt with otherwise
Much less does it speak of the manner in which the goods manufactured out of such purchased goods if any are dealt with
The exemptions provided in sub section 2 are equally un related to the above aspects
Sub section 1 is clear and simple
The tax becomes payable by the purchasing dealer in the two situations contemplated by clauses a and b of the said sub section
If he can establish any of the facts mentioned in clauses a to d of sub section 2 he gets an appropriate exemption
Otherwise not
We are therefore unable to see any room for contending that the tax imposed by the said section is in the nature of consignment tax or a use or consumption tax
Simply because the petitioner chooses to take the goods purchased by him out of the State in the same form and condition or otherwise for being used as raw material in his factory at Calcutta makes no difference to the levy
The validity of the levy cannot depend upon what a particular dealer or person chooses to do with the goods
It was argued for the petitioner that sub section 2 of Section 3 AAAA places a heavy and uncalled for burden upon the purchasing dealer that it is not practicable for the purchaser to establish that the selling person other than the registered dealer has paid the tax or not
It is submitted that the petitioner purchases his goods from hundreds of persons who are not registered dealers and it cannot reasonably be expected of the petitioner to gather the particulars of or from all such persons
We are unable to appreciate this contention
A person other than a registered dealer is not amenable to the discipline of the Act
He cannot indeed collect any tax Section 8A 2 and therefore will not 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
It 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
So far as registered dealers are concerned all that the purchasing dealer need prove is that the said goods have already been or may be subjected to tax under State Act or 
On this score we see no difficulty for the purchasing dealer
From the bill given by the selling dealer the purchasing dealer 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 
We are equally unable to see any vagueness in the provision nor is it established that any such vagueness is operating to the prejudice of the petitioner
In this view of the matter it is unnecessary strictly speaking to consider whether the present Section 3 AAAA is in effect and substance the same as the one obtaining prior to 1992 Amendment Act
For the sake of completeness however we may mention that under Section 3 AAAA before it was substituted in 19920 tax was payable by the purchasing dealer where he purchased goods liable to tax was payable by the purchasing dealer where he purchased goods liable to tax at the point of sale to the consumer in circumstances where no tax is payable by the seller provided he did not resell the said goods in the same form and condition within the State or in the course of inter State trade or commerce
The section was understood by the Division Bench in the following manner  23
That brings us to the vital question as to which are the circumstances in which sale of the goods purchased within the State or in the course of inter State trade and commerce in the same form and condition in which the dealer purchased the goods may be rendered impossible
To our mind keeping in view the usual course of business the normal possibilities seem to be these 1 use and consumption of the goods purchased by the purchasing dealer in the manufacture of some other taxable goods within the State 2 despatch of the manufactured goods without sale outside the State otherwise than in the course of inter State trade and commerce 3 despatch of the goods out of the territory of India pursuant to a contract of sale ie despatch in the course of an export sale 24
These then are the activities or transactions that constitute the taxable events on the happening of which the tax would be immediately attracted that is to say the tax in question becomes exigible at these points
Once these points are reached the possibility of the sale of goods purchased within State or in the course of inter State trade and commerce in the same form and condition shall stand excluded
The fourth and the last condition envisaged by Section 3 AAAA set out hereinabove necessary for attracting the levy would also stand fulfilled
It is only on the happening of these events that the taxing authority can reach the conclusion that the purchasing dealer has be come liable under Section 3 AAAA
 With respect we find ourselves unable to agree with the above understanding of the section
All that the section 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 seller 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 AA no purchase tax was payable under Section 3 AAAA
It is obvious that the section did not speak or 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 he 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 those contingencies the State would get the revenue in one case under the State Sales Tax Act and in the other case under the 
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 atleast on one transaction of sale of the goods and not towards taxing the consignment of goods purchased or the products manufactured out of them
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 and in Section 3 AAAA of UP Act as it stood prior to 1992 Amendment Act or for that matter as it stands now
These basic differences cannot be ignored
Constitutionality of Section 3 AAAA 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 II of the Seventh Schedule to the Constitution
PART IV ANDHRA PRADESH Writ Petitions No 655 669 of 1983 are filed by Hotel Balaji and 14 other hotelsrestaurants for issuance of a writ order or direction directing the respondents viz State of Andhra Pradesh and its Sales Tax Authorities not to levy and collect purchase tax on milk  4 under Section 6 A as also the surcharge tax  10 of the tax
According to the petitioners such a levy violates Article 14 as also the fundamental right guaranteed to them by sub clause g of clause 1 of Article 19 of the Constitution
Civil Appeal Nos
10753 57 of 1983 are directed against the judgment and order of a Division Bench of the Andhra Pradesh High Court upholding the validity of Section 6 A of the Andhra Pradesh General Sales Tax Act
The case of the petitioners in the writ petitions is this They purchase the milk required by them both from registered dealers as well as persons other than registered dealers
The authorities are collecting purchase tax  4 under Section 6 A from the petitioners which is illegal in view of the fact that the sale of fresh milk is exempted from tax by a notification issued by the Government of Andhra Pradesh under Section 9 of the Act being GOMs
No1091 dated 1061957
Because of the said exemption notification not only the seller is exempted but also the purchaser
In some cases the petitioners purchased milk from registered dealers like Andhra Pradesh Dairy Development Corporation which is exempted from sales tax by virtue of a notification issued under Section 9
In such cases the tax is sought to be levied upon the petitioners which is equally illegal
The milk purchased by the petitioners is being consumed in preparing and serving to consuming public tea coffee and other eatables
The tax levied under Section 6 A is really not upon the purchase but upon the use and consumption
GOMs
No1091 dated 1061957 as originally issued read as follows In exercise of the power conferred by sub section 1 of Section 9 of the Andhra Pradesh General Sales Tax Act 1957 Andhra Pradesh Act 6 of 57 the Governor of Andhra Pradesh hereby exempts from the tax payable under the said Act the sales of following goods 1 and 2 omitted as unnecessary 3 fresh milk curd and butter milk By GOMs No 60 Revenue dated 1011961 item 3 was substituted as follows fresh milk curd and butter milk sold by dealers exclusively dealing in them By GOMs
No 1786 dated 20111962 the words and their byeproducts realised by utilisation of surpluses thereof were added at the end of the entry
By yet another amendment the word bye products was substituted by the word products
Thus at the relevant time item 3 of the said notification read as follows fresh milkcurd and butter milk sold by dealers exclusively dealing in them and their products realised by utilisation of surpluses thereof
 It is also brought to our notice that by GOMs
No 669 dated 2651975 the Government of Andhra Pradesh exempted the sale of pasturised milk by the Andhra Pradesh Dairy Development Corporation from the levy of tax payable under the said Act with effect from the 1st day of May 1975
In the Civil Appeals the appellant is Hindustan Milk Food Manufacturers Ltd They purchased milk mainly from persons other than registered dealers which they utilised in manufacture of various products
Its products are sold not only within the State of Andhra Pradesh but also in other States of the country
It has an office at Dhawaleshwaram in East Godavari Distt
of Andhra Pradesh
It is registered as a dealer under the Act
In the course of their assessment proceedings for the assessment year 1979 80 among other assessment years the appellant contended that the milk having been exempted by virtue of a notification issued under Section 9 is not taxable and that levy of purchase tax is incompetent
They questioned the constitutionality of Section 6 A
The Assessing authority overruled the said objections and levied the purchase tax on the turnover of milk purchased by the appellant
The matter was brought to the High Court which as stated above
negatived the challenge to the constitutionality of the provision 
So far as the exemption notification in GOMs
No 1091 dated 1061957 is concerned it must be noticed that what was exempted there under was the tax payable on the sale of fresh milk sold by dealers exclusively dealing in them
So far as agriculturists are concerned they are not dealers at all by virtue of Explanation II to the definition of dealer H contained in clause e of Section 2
The notification has therefore no application to sale of milk by them
Since the purchase by Hindustan Milk Food is almost wholly from such agriculturists it cannot take advantage of the said notification
If however any milk is purchased by the appellant or the writ petitioners from dealers exclusively dealing in milk they would be liable to pay the purchase tax only in cases where the selling dealer is not liable to pay the tax either because of an exemption notification or otherwise
A contention was urged before us that the milk was not at all taxable under the Act
It was submitted that milk is not mentioned in any of the Schedules I to VI appended to the Act
This argument in our opinion proceeds upon a mis apprehension of the scope and scheme of Section 5 as we shall presently demonstrate
Fresh milk was taxable as general goods under Section 51 of the 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 and 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 if 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 situations
Section 6 A was inserted by Andhra Pradesh General Sales Tax 
Amendment Act 49 of 1976 with effect from September 1 1976
As originally enacted the section read as follows 6 A Levy of tax on turnover relating to purchase of certain goods Every dealer who in the course of business i Purchases any goods the sale or purchase of which is liable to tax under this Act from a registered dealer in circumstances in which no tax is payable under Section 5 or under Section 6 as the case may be or ii purchases any goods the sale or purchase of which is IV liable to tax under this Act from a person other than a registered dealer and a either consumes such goods in the manufacture of other goods for sale or otherwise or b disposes of such goods in any manner other than by way of sale in the State or c despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter State trade or commerce shall pay tax on the turnover relating to purchase aforesaid at the same rate which but for the existence of the aforementioned circumstances tile tax would have been leviable on such goods under Section 5 or 6
The Section has been amended in some particulars by the Amendment Act 18 of 1985 but these amendments do not make a difference to nature or character of the tax
Be that as it may  we may as well set the section as it stands now in view of the fact that the validity of the section as such is questioned before us
It reads 6 A Levy of tax on turnover relating to purchase of certain goods Every dealer who in the course of business i purchases any goods the sale or purchase of which is liable to tax under this Act from a registered dealer in circumstances in which no tax is payable under section 5 or under Section 6 as the case may be or ii purchases any goods the sale or purchase of which is liable to tax under this Act from a person other than a registered dealer and a consumes such goods in the manufacture of other goods for sale or consumes them otherwise or b discloses of such goods in any manner other than by way of sale in the state or c despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter State trade or commerce shall pay tax on the turnover relating to purchase aforesaid at the same rate at which but for the existence of the aforementioned circumstances the tax would have been leviable on such goods under Section 5 or Section 5 A or Section 6 Provided that in respect Or declared goods such rate together with the rate of additional tax specified in Section 5 A shall not exceed four percent of the purchase price of such goods An analysis of the Section yields the following ingredients A i a dealer who in the course of business purchases any goods liable to tax under the Act ii from a registered dealer in circumstances in which no tax is payable by such selling dealer under Section 5 or 6 and iii consumes such goods in the manufacture of other goods for sale or consumes them otherwise or iv disposes of such goods in any manner other than by way of sale in the State or v despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter State trade or commerce vi such purchasing dealer shall pay the tax at the same rate at which it would have been payable by the selling dealer
Bi A dealer who in the course of his business purchases any goods which are taxable under the Act ii from a person other than a registered dealer and iii consumes such goods in the manufacture of other goods for sale or consumes them otherwise or iv disposes of such goods in any manner other than by way of sale in the State or v despatches them to a place outside the Stale except as a direct result of sale or purchase in the course of inter State trade or commerce vi such purchasing dealer shall pay the tax at the same rate at which it would have been payable by the selling dealer
 The proviso which governs both the above situations provides that in case of declared goods the total tax shall not exceed 4 of the purchase price of such goods
Broadly speaking the effect is Tax payable at sale point becomes the tax payable on the purchase point in certain circumstances
Because the seller is not or cannot be taxed for certain reasons the purchasing dealer is being taxed
Two examples each illustrating one of the two situations envisaged by the Section may be given a Andhra Pradesh Dairy Development Corporation a registered dealer is exempted from paying the tax on sale of pasturised milk
The purchaser of pasturised milk from the Corporation is taxed provided he satisfies one of the conditions specified in clauses i to iii mentioned in the Section thereby becoming the last purchaser in the State of such milk
b Fresh milk is taxable at sale point
But when it is sold by a farmeragriculturist raising cattle on lands held by him he cannot be taxed because he is not a dealer
The purchaser is taxed in such cases provided he satisfies one of the conditions specified in clauses i to iii in the Section thereby becoming the last purchaser in the State of such milk
It would therefore be clear that the real object of the clauses i to iii in the Section 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 case 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
In this connection observations of PS Poti J in Malabar Fruit Products Cov
STO 30 STJ 537 which have been expressly approved by this court in State of Tamil Nadu vs Kanda Swami 36 STC 191  discussed in detail in part V may be referred to
It is not necessary to set out the said discussion here over again
In the circumstances we are unable to see how the tax imposed by Section 6 A be described either as use tax consumption tax or consignment tax
Since we are of the opinion as explained in Part V that Goodyear does not interpret Section 9 of Haryana Act and Section 13AA of Bombay Act correctly its reasoning cannot be brought in here to contend that clause c of Section 6 A imposes a consignment tax
It is a purchase tax perfectly warranted by Entry 54 of List II of the Seventh Schedule to the Constitution
Reference to a few more provisions of the Act would be appropriate at this stage to complete the picture
The expression dealer has been defined in clause e of Section 2
It is not necessary to notice the entire definition except Explanation II which says that a grower of agricultural or horticultural produce cannot be deemed to be a dealer if he sells his produce
Explanation reads as follows Explanation II Where a grower of agricultural or hor ticultural produce sells such producer grown by himself on any land in which he has an interest whether as owner usufructuary mortgage tenant or otherwise in a form different from the one in which it was produced after subjecting it to any physical chemical or any process other than mere cleaning grading or sorting he shall be deemed to be a dealer for the purpose of this Act
 Section 5 is the charging section
Prior to the Amendment Act 4 of 1989 Section 5 had four sub sections
The first sub section made all salespurchases by dealers within the State of Andhra Pradesh subject to tax
It however the goods sold were those mentioned in Schedule I they were taxable at a single point viz at the point of sale and at the rate prescribed in the said Schedule
Similarly if the goods fell in the Second Schedule they too were taxable only at one point namely the point of purchase at the rate prescribed
Sub section 21 Schedule III comprises of declared goods while Schedule IV sets out goods which are totally exempted Income tax under Section 8 of the Act
Schedule V deals with jaggery and Schedule VI with 2liquors
In other words goods which did not fall in any of the Schedules I to VI fell under sub section I and were taxed as general goods
In this sense fresh milk which is not mentioned in any of the Schedules i to VI was chargeable as general goods under sub section I of Section 5
By Amendment Act 4 of 1989 the entire scheme of Section 5 has been changed
The present section says that the goods mentioned in Schedules I to VII shall be taxed at the point and at the rate specified therein
Schedule VII which has been inserted by the very same Amendment Act is in the nature of a residuary Schedule the good which do not fall in any of the Schedules I to VI fall under Schedule VII
Even such goods have also been made taxable only at one point and at the rate specified
After the coming into force of the said Amendment Act of 1989 fresh milk would fall under Schedule VII and taxable as such
It is therefore wrong to say that sale of milk was or is not taxable under the Act
Section 9 empowers the Government to exempt either the sale of certain goods or sates by certain persons either wholly or partly
Section reads as follows 9
Power of State Government to notify exemptions and reductions of tax or interest 1 The State Government may by notification in the Andhra Pradesh Gazette make an exemption or reduction in rate in respect of any tax or interest payable under the Act i on the sale or purchase of any specified class of goods at all points or at any specified point or points in series of sales or purchases by successive dealers or ii by any specified class of persons in regard to the whole or any part of their turnover
2 Any exemption from tax or interest or reduction in the rate of tax notified under sub section I a may extend to the whole of the State or to any specified area or areas therein b may he subject to such restrictions and conditions as may be specified in the notification including conditions as to licences and licence fees
 It may be noticed that 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 point or points in the scries of sales or purchases of successive dealers
Several notifications have been issued by 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
No1091 is one of them
We have already noticed the rather qualified terms in which the exemption is couched
It is not a general exemption but a qualified one
In the light of the specific scheme of Section 9 and the language of GOMs
No1091 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 as well much less in all cases
For the above reasons appeals and writ petitions are dismissed with no order as to costs
PART V DOES GOODYEAR REQUlRE RE CONSIDERATION As mentioned earlier counsel for all the assessees in these matters strongly rely on the decision of this Court in Goodyear which invalidated a purchase tax levied by the Haryana and Maharashtra Sales Tax Acts
We may therefore notice this decision in some detail
What precisely is the ratio of Goodyear Provisions relating to purchase tax in Haryana Sales Tax Act and Bombay Sales Tax Act fall for consideration in this case
Section 9 of the Haryana Act before it was amended by Haryana General Sales Amendment and Validation Act 1983 read as follows 9 Where a dealer liable to pay tax under this Act purchases goods other than those specified in Schedule B from any source in the State and a uses them in the State in the manufacture of i goods specified In Schedule B or ii any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter State trade or commerce or within the meaning of sub section l of Section 5 of the  in the course of export out of the territory of India
b exports them in the circumstances in which no tax is payable under any other provisions of this Act there shall be levied of subject to the provisions of Section 17 a tax on the purchase of such goods at such rate as may be notified under Section 15
 A notification dated 19th July 1974 was issued by the Government of Haryana under the said provision read with Section 151 of the Act in purported implementation of the said provision
Validity of Section 9 as well as of the notification was challenged in a batch of writ petitions filed in the High Court of Punjab and Haryana
The High Court upheld the challenge holding that whereas the said provision Section 9 provided only for the levy of a purchase tax on the disposal of manufactured goods the notification by making a mere despatch of goods to the dealers them selves taxable in essence legislates and imposes a substantive tax which it obviously cannot Goodyear India Ltd vs State of Haryana 1990 76 STC 71
After it was amended by the aforesaid amendment Act sub sections   and 2 of Section 9 read as follows 9 Liability to pay purchase tax 1 Where a dealer liable to pay tax under this Act a purchases goods other than those specified in Schedule B from any source in the State and uses them in the State in the manufacture of goods specified in Schedule B or b purchases goods other than those specified in Schedule B from any source in the State and uses than in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter State trade or commerce or in the course of export outside the territory of India within the meaning of sub section 1 of Section 5 of B the  or c purchases goods other than those specified in Schedule B from any source in the State and exports them in the circumstances in which no tax is payable under any other provision of the Act there shall be levied subject to the provisions of Section 17 a tax on the purchases of such goods at such rate as may be notified under Section 15
2 Notwithstanding anything contained in this Act or the rules made thereunder if the goods leviable to tax under this section are exported in the same condition in which they wore purchased the tax shall be levied charged and paid at the station of despatch or at any other station before the goods leave the State and the tax so levied charged and paid shall be provisional and the same shall be adjustable towards the tax due from the dealer on such purchase as a result of assessment or re assessment made in accordance with the provisions of this Act and the rules made there under on the production of proof regarding the payment thereof in the State Again a batch of writ petitions was filed questioning the validity of the amended provision which challenge too was upheld by the High Court in its decision in Bata India Ltd vs State of Haryana 54 STC 226
The main ground upon which the High Court allowed the writ petitions was that mere despatch of goods to a place outside the State in any manner other than by way of sale in the course of inter State trade or commerce is synonymous with or is in any case included within the ambit of consignment of goods to the person making it or to any other person in the course of inter state trade or commerce as specified in Article 269liv and Entry 92B of List l of the Seventh Schedule to the Constitution and thus beyond the competence of the State legislature
According to the High Court the taxable event was not the purchase of goods nor the use of such goods in manufacture of end products but the despatch of goods
Doubting the view taken in Bata India one of the learned Judges of the Punjab and Haryana High Court Punchhi J as he then was referred the matter to a Bull Bench which took a different view in Desraj Pushp Kumar Gulati vs State of Punjab 58 STC393
The Full Bench was of the view that according to Section 9 amended the taxing event is the act of purchase of goods which are used in the manufacture of end products and not the act of despatch or consignment as held in Bata India
The correctness of all the three decisions aforesaid was questioned in appeals filed before this Court
The appeals were heard by a Bench comprising Sabyasachi Mukharji J as he then was and one of us SRanganathan J
Mukharji J in his separate judgment set out the test for determining the taxable event in the following words It is well settled that the main test for determining the taxable event is that on the happening of which the charge is affixed
The realisation often is postponed to further date
The quantification of the levy and the recovery of tax are also postponed in some cases Taxable event is that which on its occurrence creates or attracts the liability to tax Then the learned Judge proceeded to analyse Section 9 amended and concluded as follows Analysing the section it appears to us that conditions specified before the event of despatch outside the State as mentioned in Section 91b namely i purchase of goods in the State and ii using them for the manufacture of any other goods in the State are only descriptive of the goods liable to tax under Section 91b in the event of despatch outside the State
If the goods do not answer both the descriptions cumulatively even though these are despatched outside the State of Haryana the purchase of those goods would not be tax under Section Ib The liability to pay tax in this section does not accrue on purchasing the goods simplicitor but only when these are despatched or consigned out of the State of Haryana
In all these cases it is necessary to find out the true nature of the tax
Analysing the Section if one looks to the purchase tax under Section 9 one gets the conclusion that the Section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods losing its original identity and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created According  the learned judge held  the is in the nature of a consignment tax which the Parliament alone could impose and not the State legislature
The correctness of the said view is questioned by the learned counsel for the State of Andhra Pradesh and other counsel for the State Governments
The question for our consideration is whether the learned Judge was not right in holding that the taxable event under the section Is not the purchase goods used in the manufacture of end products but the despatch of manufactured goods to out state destinations
The other provision considered in the said decision is the one contained in Section 13AA of the Bombay Sales Tax Act
The said provision which was introduced into the Act by the Maharashtra Act 28 of 82 read as follows at the relevant time 13AA
Purchase tax payable on goods in Schedule C Part I when manufactured goods are transferred to outside branches
Where a dealer who is liable to pay tax under this Act purchases any goods specified in Part I of Schedule C directly or through Commission agent from a person who is or is not a Registered dealer and uses such goods in the manufacture of taxable goods and despatches the goods so manufactured to his own place of business or to his agent s place of business situated outside the State within Indian then such dealer shall be liable to pay in addition to the sales tax paid or payable or as the case may be the purchase tax levied or leviable under the other provisions of this Act in respect of purchases of such goods a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under Section 32 which he is to furnish next thereafter
The validity of the said provision was challenged inter alia by Hindustan Lever Limited which was negatived by the Bombay High Court in its decision reported in 72 STC 69
The High Court was of the opinion that the additional purchase tax leviable under the said provision is on the purchase value of VNEOil used in the manufacture of goods transferred outside the State and not on the value of the manufactured goods so transferred
It held further that the goods taxed under Section 13AA are consumed in the State as raw material in the process of manufacturing other commodities and therefore tax imposed thereon cannot be said to hinder the free flow of trade within the meaning of Article 301 of the Constitution
The question again was which is the taxable event according to Section 13AA
Mukharji J on an analysis of the section held that the taxable event is the despatch of manufactured goods outside the State which means that the levy is beyond the competence of the State legislature
The attack based upon Article 301 of the Constitution was however repelled
Though agreeing with the conclusion arrived at by Mukharji J Ranganathan J made a few pertinent observations in his separate opinion
The learned Judge opined that both Section 9 of the Haryana Act and Section 13AA of the Bombay Sales Tax Act purport only to levy a purchase tax and further that the tax however becomes exigible not on the occasion or event of purchase but only later
It materialises only if the purchaser a utilises the goods purchased in the manufacture of taxable goods and b despatches the goods so manufactured otherwise than by way of sale to a place of business situated outside the State
The legislature however is careful to impose the tax only on the price at which the raw materials are purchased and not on the value of the manufactured goods consigned outside the State
The State describes the tax as one levied on the purchase of a class of goods viz those purchased in the State and utilised as raw material in the manufacture of goods which are consigned outside the State otherwise than by way of sale
 The learned Judge opined to me it appeared as plausible to describe the levy as a tax on purchase of goods inside the State which attaches itself only in certain eventualities as to describe it as a tax on goods consigned outside the state but limited to the value of raw material purchase inside the State and utilised therein The learned Judge stated that he had considerable doubts as to the taxable event but that on further reflection he was inclined to agree with H SMukharji J that the tax though described as a purchase tax actually became effective with reference to a totally different class of goods and that too only on the happening of an event which is unrelated to the Act of purchase and therefore in truth and essence it was a consignment tax
The crucial question therefore is what is the basis of taxation in either of the above provisions In other words the question is whether levy of tax is on the purchase of goods or upon the consignment of the manufactured goods Let us first deal with Section 9 of the Haryana Act as amended in 1983
Properly analysed the following are the ingredients of the Section 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 goods to a place outside the State in any manner otherwise than by way of sale in the course of a inter State trade or commerce or in the course of export outside the territory of India within the meaning of sub section 1 of Section 5 of the Central Sales Tax Act 1956
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
Now what does the above analysis signify The section applies only in those cases where a the goods are purchased for convenience sake I may refer to them as raw 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 e 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 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 again 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
With the greatest respect at our command we beg to disagree
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 hound 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 says it would retain the levy and collect it since there is no reason for waiving the purchase tax in these two situations
Now coming to inter State sale and export sale it may be noticed that 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 States in accordance with certain principles
Where of course the sale is an export sale within the meaning of Section 51 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 an 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
Would it be right to say that the levy is upon consignment of manufactured goods in such a case True it is that the 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 act sale or are consigned to the manufacturing dealer s dopotsagents outside the State of Haryana
But does that change the nature and character of the levy Does such postponement if one can call it as such convert what is avowedly a purchase tax what is on raw material levied on the purchase price of such raw material to a consignment tax on the manufactured goods We think not
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 as pointed out by Ranganathan J in his separate opinion to characterise the said tax both as purchase tax as well as consignment tax
But where two interpretations are possible one which sustains the constitutionality andor effectuates its purpose and intendment and the other which effectively nullifies the provision the former must be preferred according to all known canons of interpretation
This is also the view expressly approved by Mukharji J in his opinion as pointed out hereinbefore
In para 71 of his opinion the learned Judge states it is well settled that reasonable construction should be followed and literal construction may be avoided if that defeats the manifest object and purpose of the Act
Commissioner of Wealth Tax Bihar and Orissa vs Kirpa Shankar Daya Shankar Vorah at page 768 and Income Tax Commissioners for City of London vs Gibbs  1942 10 ITR Suppl
121 at page 132 HL
emphasis supplied However we would presently show that merely because the levy attaches on the happening or non happening of a subsequent event the nature and character of the levy does not change
In several enactments
for instance tax is levied at the last sale point or last purchase point as the case may be
How does one determine the last purchase point in the State  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
As pointed out pertinently by PSPoti J as he then was in Malabar Fruit Products Company and Ors
vs The Sales Tax Officer and Ors 1972 30 STC 537 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
In the said decision
the learned Judge was dealing with the validity and construction of Section 5 A of Kerala General Sales Tax Act 1963 sub section l whereof read as follows 5A Levy of purchase tax 1 Every dealer who in the course of his business purchases from a registered dealer or from any other person any goods
the sale or purchase of which is liable to tax under this Act in circumstances in which no tax is payable under Section 5 and either a consumes such goods in the manufacture of other goods for sale or otherwise or b disposes of such goods in any manner other than by way of sale in the State or c despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter State trade or commerce shall whatever be the quantum of the turnover relating to such purchase for that year at the rates mentioned in Section 5
 One of the arguments urged against the validity of the said provision was that inasmuch as the tax is levied depending upon the mode in which the goods purchased are consumed disposed of or despatched the tax is really one in the nature of consumption tax or use tax but not sales tax
This argument was answered by the learned Judge in the following words According to me this contention is based on a misconception of the scope of taxation on the sale of goods
It is true that sales tax is a tax imposed on the occasion of the sale of goods
But it has no reference to the point of time at which the sale or purchase takes place
It refers to the connection with the event of purchase or sale and not the point of time at which such purchase or sale takes place
To read it otherwise would render any retrospective in position of sales tax invalid as in every such case the tax would not be one which arises on the occasion of sale
By the same logic it would not he possible to tax any goods at the last purchase point in the State for the last purchase point in regard to any goods could be determined only when the goods arc sold later and not when the goods are purchased
On the same reasoning as urged by counsel one should say in such a case that since the goods are taxed only when the goods are sold outside the State or are despatched for such sale outside the State and so the last purchases are taxed not on the occasion of the purchases and consequently it is beyond the competence of the Legislature
That certainly cannot be and the Supreme Court has held in the decision in State of Madras vs Narayanaswami Naidu 1968 21 STC1 SC that the goods are taxable in such cases in the financial year when they become the last purchases
 C The decision of Poti J was affirmed by a Division Bench of Kerala High Court in Yusuf Shabeer and Ors
vs State of Kerala and Ors
 1973 32 STC 359
Both these decisions were expressly referred to and approved by a three Judge Bench of this Court in State of Tamil Nadu vs Kandaswami and Ors 1975 36 STC page 191
Kandaswami was concerned with the construction of Section 7 A of the Tamil Nadu General Sales Tax Act which too a levied purchase tax and is couched in language similar to Section 5 A of the Kerala Act
While dealing with the scheme of Section 7 A this court quoted with approval certain passages from the judgment of Poti J including the following sentence If the goods are not available in the State for subsequent taxation by reason of one or other of the circumstances mentioned in clauses a b and c of Section 5 A1 ofthe Act then the purchaser is sought to be made liable under Section 5 A
This statement accords with our understanding of the scheme of Section 9 of Haryana Act as set out hereinabove
To repeat the scheme of Section 9 of Haryana 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 nation and its economy as explained hereinbefore
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
Another observation in Kandaswami relevant for the present purpose may also be noticed It may be remembered that Section 7 A is at once a charging as well as a remedial provision
Its main object is to plug leakage and prevent evasion of tax
In interpreting such a provision a construction which would defeat its purpose and in effect obliterate it from the statute book should he eschewed
If more than one construction is possible that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile
The view taken by the High Court is repugnant to this cardinal canon of interpretation
 In the light of the above scheme of Section 9 it would not be right in our respectful opinion 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
Section 9 of Haryana Act and Section 13AA of Bombay Act are intended to encourage the industry and at the same time derive revenue
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 Side
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 in our respectful opinion for saying that the tax is on the consignment of manufactured goods
We may in this connection refer to the decision of a Constitution Bench of this Court in Andhra Sugars vs State of Andhra Pradesh 21 STC 212 relating to the validity of Section 21 of the AP Sugarcane Regulation of Supply and Purchase Act 1961
Sub section 1 of Section 21 read as follows 21
1 The Government may by notification levy a tax at such rate not exceeding five rupees per metric tonne as may be prescribed on the purchase of cane required for use consumption or sale in a factory
 One of the arguments urged against the validity of the levy was that since the levy is not on every purchase of sugarcane but only on the purchase of cane required for use consumption or sale in a factory the tax is not really a purchase tax referable to Entry 54 of List II of the VIIth Schedule to the Constitution but a use tax a tax of a different character altogether not falling under Entry 54
It was also argued that since the tax is levied at the stage of entry of cane into the factory for being used and consumed in the manufacture of sugar it is in the nature of an entry tax but since the factory was not a local area within the meaning of Entry 52 of List II the levy was incompetent
Both the arguments were rejected in the following words Under that entry the State Legislature is not bound to levy a tax on all purchase of cane
It may levy a tax on purchases of cane required for use consumption or sale in a factory
The Legislature is competent to tax and also to exempt from payment of tax sales or purchases of goods required for specific purposes
Other instances of special treatment of goods required for particular purpose may he given
Section 6 and Schedule I item 23 of the Bombay Sales Tax Act 1946 levy tax on fabrics and articles for personal wear
Section 2jaii of the CP and Berar Sales Tax Act 1947 exempts sales of goods intended for use by a registered dealer as raw materials tor the manufacture of goods
Mr Chatterjee submitted that the tax levied under Section 21 was a use tax and referred to Mcleod vs Dilworth and Co    and CG Naidu and Co vs The State of Madras AIR 1953 Mad
116 127 128 3 STC 405
He argued that the State Legislature could not levy a use tax which was essentially different from a purchase tax
The assumption of counsel that Section 21 levies a use tax is not well founded
The taxable event under Section 21 is the purchase of goods and not the use or enjoyment of what is purchased
The constitutional implication of a use tax in American law is entirely irrelevent  To appreciate another argument of Mr Chatterjee it is necessary to refer to a few Acts
It appears that paragraph 21 of the Bill published in the Gazette on March 3 1960 preliminary to the passing of Act No 43 of 1961 provided for a levy of a cess on the entry of cane into the premises of a factory for use consumption or sale therein
On December 13 1960 this court in Diamond Sugar Mills Ltd and Another vs The State of Uttar Pardesh and Another   struck down a similar provision in the UP Sugarcane Cess Act 1956 on the ground that the State Legislature was not competent to enact it under Entry 52 List II as the premises of a factory was not a local area within the meaning of the entry
Having regard to this decision paragraph 21 of the Bill was amended and Section 21 in its present form was passed by the State Legislature
The Act was published in the Gazette on December 30 1961
Mr Chatterjee submitted that in this context the levy under Section 21 was really a levy on the entry of goods into a factory for consumption use or said therein
We are unable to accept this contention
As the proposed tax on the entry of goods into a factory was unconstitutional paragraph 21 of the original Bill was amended and Section 21 in its present form was enacted
The tax under Section 21 is essentially a tax on purchase of goods The taxable event is the purchase of cane for use consumption or sale in a factory and not the entry of cane into a factory
As the tax is not on the entry of the cane into a factory it is not payable on cane cultivated by the factory and entering the factory premises
 For the above reasons we find it difficult to agree with the reasoning of Mukharji J in Goodyear
It is also not possible to agree with the learned Judge when he says that the two conditions specified before the event of despatch outside the State as mentioned in Section 91b namely i purchase of goods in the State and ii using them for the manufacture of any other goods in the State are only descriptive of the goods liable to tax under Section 91h in the event to despatch outside the State
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 above construction in our respectful opinion 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 except for the two minor areas pointed out in Murli Manohar and Company vs State of Haryana   the Section which has its parallels in all the State enactments has practically become redundant
This was the main reason we undertook to reconsider the said decision which course we would not have ordinarily agreed to adopt
In our respectful opinion the tax purports to be and is in truth a purchase tax levied on the purchase price of raw material purchased by a manufacturer
In certain situations the three situations mentioned above viz sale of manufactured goods within the State inter State sale and export sale of manufactured goods it is waived
In other cases it is not
It is argued for the assessees that apart from Goodyear a Bench of three Judges of this Court has independently approved and affirmed the correctness of the ratio and reasoning in Goodyear
Reference is to Mukerian Papers Ltd vs State of Punjab  The case arose under the Punjab General Sales Tax Act and the provision which fell for interpretation was Section 4B
It levied purchase tax on the raw material used in the manufacture of goods which in turn are sold outside the State otherwise than by way of sale in the course of inter State trade or commerce or in the course of export out of the territory of India
The argument for the assesseeappellant was that the main question of law involved in this case is concluded by the decision of this court in Goodyear India Ltd vs State of Haryana which was an appeal arising from the High Court s decision in the case of the same assessee 
It was this contention which was examined by the Bench
Section 4B of the Punjab Act was analysed and it was found that it is in material particulars similar to Section 9 of the Haryana Act even though the language was not identical
Ahmadi J speaking for the Bench observed therefore even though the language of Section 4B of the Act is not identical with the relevant part of Section 91 of the Haryana Act it is in substance similar in certain respects particularly in respect of the point of time when the liability to pay tax arises
Under that provision as here the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch of the goods outside the State
We are therefore of the opinion that the ratio of the said decision of this Court in Goodyear India Ltd applies on all fours to the main question at issue in this case When the counsel for the revenue sought to argue that the decision of this court in Kandaswami takes a different view the Bench did not permit the same to be urged in the view of the fact that the correctness of the judgment in Goodyear was not canvassed before them
The Bench said the decision in Kandaswami though in the context of an analogous provision was distinguished by this court in Goodyear India Ltd on the ground that it did not touch the core of the question at issue in the latter case
This aspect of the matter is elaborately dealt with in paragraphs 31 to 34 at page 796 of the report
We need not dilate on this any more since the correctness of the judgment in Goodyear India Ltd is not canvassed before us
 It is thus clear that the main argument for the Bench was that the ratio of Goodyear governs the said case and it was so found
It is equally clear that the correctness of the decision in Goodyear was not questioned before the Bench and that is why the Bench took care to specifically advert to and record the said circumstance
So far as the decision in Murli Manohar  Co vs State of Haryana  is concerned it arose under Haryana Sales Tax Act and explains the meaning of export sale referred to in Section 91h of the Act
There is no discussion in this decision about the point at issue before us
The same is the position under Section 13AA of the Bombay Sales Tax Act
The said provision properly analysed yields the following ingredients i where a dealer who is liable to pay tax under this Act purchases any goods specified in Part I of Schedule C either directly or through commission agent from a person who is or is not a registered dealer and ii uses such goods in the manufacture of taxable goods and iii despatches the goods so manufactured to his own place of business or to his agent s place or business situated outside the State within India
iv such dealer shall pay in addition to the sales taxpurchase tax paid or payable or levied or leviable as the case may be a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture
Here again it may be noticed that the tax levied is a purchase tax on the purchase of raw material and not upon the consignment of the manufactured goods The object of this provision too is the same as of the Haryana provision The levy is waived where the manufactured goods are sold within the State or sold in the course of inter State trade or commerce or sold in the course of export
It is retained and collected where the goods are taken out of Maharashtra State by way of consignment in which event the State sees no reason not to retain and collect the levy on purchase of raw material The provisions is substantially similar to Section 9 of Haryana Act
Whatever we have said with respect to the Haryana provision applies equally to this provision
It is not necessary to repeat the same here
Before parting with this matter it is necessary to clarify it was brought to our notice that both the Haryana and Bombay provisions have since been substituted with retrospective effect
We have not referred to those provisions in this part for the reason that we are concerned only with the reasoning in Goodyear
For the reasons mentioned above we uphold the constitutional validity of the impugned provisions
The appeals writ petitions SLPs and TC accordingly fail and are dismissed No order as to costs GN Petitions dismissed


Summary:
Section 32 1 ii of the Income Tax Act 1961 provided for depreciation while computing business income for purpose of income tax
It was allowed at a percentage of the written down value of certain capital assets employed in the business
Section 351 provided for the deduction of four types of expenditure on scientific research and the deduction provided under 35 1  iv was to the effect that in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee such deduction as may be admissible under the provisions of sub section 2
Sub Section 2 provided that for the purposes of clause iv of sub section 1 one fifth of the capital expenditure incurred in any previous year should be deducted for that previous year and the balance of the expenditure should be deducted in equal instalments in each of the four immediately succeeding previous years
It further provided in clauses iv and v that where a deduction was allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset no deduction should be allowed under clauses i ii and iii of sub section 1 of section 32 for the same previous year in respect of that asset and where the asset mentioned in clause ii was used in the business after it ceased to be used for scientific research related to that business depreciation should be admissible under clauses i ii and iii of sub section 1 of Section 32
Explanation 1 to Section 431 also provided that where an asset was used in business after it ceased to be used for scientific research related to that business and a deduction had to be made under clause i clause ii or clause iii or sub section 1 or sub section 1A of Section 32 in respect of that asset the actual cost of the asset to the assessee as reduced by the amount of any deduction allowed under clause iv of sub section 1 of Section 35
The provisions of Section 321 ii and Section 352 1 iv and v read with Explanation 1 to Section 431 virtually repeated the provisions contained in Section 102 vi and 102 xiv of the 1922 Act
In 1968 there was an amendment in the provisions of Section 352
The effect of the amendment was that the entire amount of capital expenditure incurred in relation to scientific research was allowed as a deduction in one year instead of being spread over a period of five years as was the position earlier
Thereafter the Finance Act 1980 made an amendment with retrospective effect from 141962 ie from the date of commencement of Act of 1961 which provided under clause iv of Section 352 that where a deduction was allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset no deduction should be allowed under clauses i ii and iii of sub section 1 of Section 32 for the same or any other previous year in respect of that asset
In the Writ Petitions filed before this Court on behalf of the asses sees it was contended that the allowances in respect of depreciation on the one hand and of capital expenditure on scientific research on the other are two totally different and independent heads of allowances one was a notional allowance to provide for the wear and tear of a capital asset employed in the business as the years rolled by and the other was an allowance for actual expenditure of a capital nature granted to give fillip to new industrial innovations and development of indigenous know how and techniques by proper planning on research and development by various business houses and therefore there was nothing wrong in construing the statute as providing cumulatively for both types of deductions in respect of the same capital asset that both the types of allowances were permissible under the statute except to the extent limited by clauses iv and v of Section 35 of the ActClauses d and e of the proviso to Section 102 xiv of the 1922 Act that this interpretation of the statutory provisions was very clear
patent and unambiguous that the retrospective amendment of the provision would impose unexpected and impossible burden on them over the years jeopardise their solvency and lay them open to action by creditors and financial institutions and such an onerous burden was unreasonable and oppressive and the provision imposing such a burden violated the fundamental rights of the assessees under Articles 14 and 191 g of the Constitution that retrospective provisions may be permissible even in taxing statutes in certain special circumstances such as in the case of provisions clarifying the impact of a statute provision curing defective legislations in the light of the judicial decisions and the like but if the legislature chose to impose a totally new burden which was not at all in contemplation earlier and proceeded to give full retrospective effect thereto such an attempt should be struck down as unreasonable and discriminatory
that the amendment was not in the nature of a statutory clarification of an ambiguity but a totally new and fresh imposition sought to be unjustifiably given retrospective effect and that the statute did not intend one deduction to preclude other
On behalf of the Revenue it was contended that the deduction provided by Section 35 1 iv was in the alternative to the deduction provided by clauses i ii and iii of sub section 1 and sub section 1A of Section 32 if one was availed of the other was not available not only during the year or years in which the deduction under Section 351 iv was availed of but permanently for the reason that if both were allowed to be availed of it amounted to grant of 200 deduction viz 100 under Section 351 iv and another 100 under sub sections 1 and 1A of Section 32 and this was totally outside the contemplation of the Act
Dismissing the writ petitions this Court HELD Per Ranganathan J For himself and Ramaswami J 11
There is a fundamental though unwritten axiom that no legislature could have at all intended a double deduction in regard to the same business outgoing if it is intended it will be clearly expressed
In other words in the absence of clear statutory indication to the contrary the statute should not be read so as to permit an assessee two deductions both under Section 102 vi and section 102 xiv under the 1922 Act or under Section 32 i ii and 352 iv of the 1961 Act qua the same expenditure
The use of the words in respect of the same previous year in clause d of the proviso to Section 102 xiv of the 1922 Act and Section 35 2 iv of the 1961 Act is not a contra indication which permits a disallowance of depreciation only in the previous years in which the other allowance is actually allowed
The purpose of the words above referred to is totally different
That the two allowances cannot be and are not intended to be granted in respect of the same asset or expenditure can be easily seen from the limitation imposed by these words
Where the capital asset is one of the nature specified the assessee can get only one of the two allowances in question but not both
For determining which of the two allowances should be granted that which the assessee chooses or that which the assessing officer might prefer it is necessary for the statute to define this and this is what has been done by the rider in clause d of the proviso to Section 102 xiv of the 1922 Act Section 352 iv of the 1961 Act
It mandates that the asssessee should in such a case be granted the special allowance for scientific research and not the routine and annual one for depreciation
Clause d of the proviso to Section 102 xiv of the 1922 Act and Section 302iv of the 1961 Act thus fall into place as an appropriate and necessary provision
The provision contained in clause e of the proviso to Section 102 xiv of the 1922 Act re enacted in Explanation to Section 431 of the 1961 Act also reinforces this line of approach
Therefore it is not correct to say that the allowances under the two provisions are by nature unconnected with and indpendent of each other
171 D H 172 A E 12
Under the provisions of the statute as they stood earlier the assessees could not have claimed continued grant of depreciation after the expiry of five previous years before the 1968 amendment and after the expiry of the first year after the 1968 amendment even though the entire cost of the capital asset in question had been allowed to be written off completely against the business profits of those five previous years or one previous year as the case may be
It is impossible to conceive of the legislature having envisaged a double deduction in respect of the same expenditure even though it is true that the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions under consideration
The last few words of the English statute viz assets for any year of assessment during any part of which they were used by the person carrying on the trade for scientific research related to the trade show that there is really no difference between the English and Indian Acts the former also in terms prohibits depreciation only so long as the assets are used for scientific research
169 F H 171 B C 13
In the circumstances it is clear that even before the 1980 amendment the Act did not permit a deduction for depreciation in respect of the cost of a capital asset acquired for purposes of scientific research to the extent such cost has been written off under Section 102 xiv of the 1922 Act351  2 of the 1961 Act
Prior to 1968 such assets qualified for an allowance of one fifth of the cost of the asset in five previous years starting with that of its acquisition and during these years the assessee could not get any depreciation in relation thereto
In respect of assets acquired in previous year relevant to assessment year 1968 69 and thereafter their cost was written off in the previous year of acquisition and no depreciation would be allowed in that year
This is clear from the statute
Equally it is not envisaged that depreciation could be allowed on them thereafter and also that it could be allowed starting with the original cost of the asset despite its user for scientific research and the allowances made under the scientific research  clause
There was no difficult at all in the interpretation of the provisions
The mere fact that a baseless claim was raised by some over enthusiastic assessees who sought a double allowance or that such claim may perhaps have been accepted by some authorities is not sufficient to attribute any ambiguity or doubt as to the true scope of the provisions as they stood earlier
173 E H 174 A CIT vs Indian Telephone Industries Ltd and ClT vs Hico Products 1991 187 ITR 517 overruled
Lohia Machines limited V Union of India SC Alkali  Chemical Corporation of India Ltd vs ClT Cal Cl
T vs Indian Explosive Ltd Cal CIT vs International Instruments P Ltd Kar
and Warner Hindustan Ltd vs ClT 1988 171 ITR 224 AP referred to
The assessees may have some possible case only if the earlier statutory provisions can be said to have been unambiguously in favour of the assessee and the 1980 amendment had radically altered the provisions to cast a new and substantial burden on the assessee with retrospective effect but there is no ambiguity
The 1980 amendment has effected no change at all in the provisions except to set out more clearly and categorically what the provision said even earlier
Thus even without the amendment the assessees cannot claim the depreciation allowance in question
Even if it is assumed that there was an ambiguity or doubt as to interpretation that was retrospectively clarified by the legislature
Therefore the validity of the amendment cannot be challenged
This is indeed beyond all doubt
174 C G Rai Ramkrishna vs State of Bihar 1964 1 SCR 897Asst
Commissioner of Urban Land Tax vs Buckingham  Carnatic Co Ltd   Krishnamurthi  Co vs State of Madras   Hira Lal Rattan Lal vs Sales Tax Officer and Anr 1973 31 STC 178 and Shiv Dutt Rai Fateh Chand vs Union of India 1984 148 ITR 644 referred to
Per Jeevan Reddy J Concurring 11
A double deduction cannot be a matter of inference it must be provided for in clear and express language regard having to its serious impact on the revenues of the State
If the LegislatureParliament wanted to provide for more than 100 deduction they would have said so as they done in cases where they have provided for what is called weighted deduction vide Section 35B of the Act of 1961
It is not possible to agree that while introducing clause xiv in sub section 2 of Section 10 of the 1922 Act consequent on the introduction of Section 204 in the UK finance Act 1944 the Indian Legislature as also the Parliament made a conscious departure from the English Amendment with the idea of providing an additional incentive over and above the deduction on account of depreciation to induce the Indian assessees to invest more in scientific research
The underlying reason in clause iv of Section 352 of Act of 1961 providing that during the years or year in which the assessee avails of the deduction under Section 351 iv he should not avail of the deduction on account of depreciation provided by clauses i ii and iii of sub section 1 and sub section 1A of Section 32 is to ensure that the assessee does not get double deduction for example where the asset was acquired prior to April 1 1957 the deduction under Section 351 iv would be allowed in five consecutive years
If during the very five previous years depreciation under the aforementioned provisions is also allowed the assessee would obtain at the end of five years a double depreciation ie 100 under Section 35 and almost 100 under Section 32
In many cases the rate of depreciation under Section 32 is 20 or even higher
If such a course was barred by clause iv during the initial five years it would not be reasonable to say that same thing can be achieved by claiming the deduction after the expiry of five years
If both the deductions are in the alternative as indicated by clause iv they must be understood as being in the alternative and not consecutive
It would be a rather curious thing to say in the case of an asset acquired prior to April 1 1967 that Parliament barred claim for depreciation under Section 32 even in the first year when only 20 of the cost of the asset is allowed as deduction under Section 351 iv it barred it in the second third and fourth years when the deduction had reached 40 60 and 80 per cent but permitted it be claimed after the fifth year by which year the entire 100 cost was allowed as a deduction
No express provision was necessary to say what is so obvious
The position after April 1
1967 is no different
That the aforesaid view is the correct one is indicated by Explanation 1 to clause 1 of Section 43 the corresponding provision in the 1922 Act being sub clause e of clause xiv of Section 102 of 1922 Act
177 H 178 A E 13
The amendment of Section 352 in 1980 is merely clarificatory in nature
It makes explicit what was implicit in the provisions
question of its constitutionality therefore does not arise
Though purporting to be retrospective it does not take away any rights which had legally vested in the assessees
180 B Commissioner of Income Tax vs Hico Products Pvt Ltd  overruled
None of the assessments relating to any of the assessment years in question has become final
They are pending at one or the other stage and in one or the other forum
Since the amendment under challenge merely makes explicit which was implicit in the unamended clause there is no question of any right vesting in the assessee and its being taken away
180 H 181 A