Appeals Nos 526527 and 529 of 1964
Appeals from the judgment and order dated December 15 1959 of the Punjab High Court in Civil Writ Nos
827 826 and 823 of 1959 respectively
Civil Appeals Nos 39 to 43 of 1965
Appeals by special leave from the judgments and orders dated March 30 1961 of the Punjab High Court in Civil Writ Nos 467 473 476 474 and 477 of 1960 respectively
Civil Appeal No 81 of 1965
Appeal from the judgment and order dated May 2 1963 of the Punjab High Court in Letters Patent Appeal No 155 of 1963
Civil Appeal No 540 of 1965
Appeal from the judgment and order dated February 18 1963 of the Punjab High Court in Civil Writ No 206 of 1962
M C Setalvad R K Garg and section C Agarwala for the appellants In CAs
No 526 527 and 529 of 1964
R Ganapathy Iyer and R N Sachthey for the respondents in C A Nos
526 527 and 529 of 1964
Rameshwar Nath and Mahinder Narain for the appellants in CAs
39 43 of 1965
Hardev Singh and R N Sachthey for the respondents in CAs
39 43 of 1965
section T Desai and O C Mathur for the appellants in CAs
Nos 81 and 540 of 1965
R Ganapathy Iyer and R N Sachthey for the respondents in CA No 81 of 1965
O P Malhotra and R N Sachthey for the respondents in CA No 540 of 1965
The Judgment of the Court was delivered by Subba Rao CJ
The decision on these appeals depends upon the interpretation of the relevant provisions of the Punjab General Sales Tax Act 1948 Punjab Act 46 of 1948 as amended by Punjab Act 7 of 1958 relating to three categories of goods namely oil seeds iron and cotton
The facts may be briefly stated
560 The assessees in
Civil Appeals Nos
526 527 and 529 of 1964 carry on business at Moga in Punjab and each owns an oil mill They purchase oil seeds and after crushing the same in their oil mills sell the oil and the residual oil cake
They are registered dealers under the Act
The Amending Act imposed a purchase tax of 2 on the purchase of oil seeds for the use in the manufacture of goods for sale
 This was in addition to the sales tax leviable on the sales of oil and oil cake
On June 23 1959 the Excise and Taxation Officer Ferozepore the 3rd respondent ill the said appeals issued notices to the 3 appellants assessees to the effect that they did not submit their returns for the year ending 1958 59 and failed to pay purchase tax in respect thereof and asked them to show cause why they should not be prosecuted for the said default
The appellants filed 3 petitions under article 226 of the Constitution in the High Court of Punjab questioning the validity of the relevant provisions of the Act and for appropriate reliefs
A Division Bench of the High Court heard the petitions along with other connected petitions and dismissed the petitions of the appellants so far as they related to purchase tax on oil seeds
Hence the appeals
Civil Appeals Nos
39 to 43 of 1965 relate to purchase tax on iron
The appellants carry on business in rolling steel at Gobindgarh
They purchase steel scrap and steel ingots and convert them into rolled steel sections
Under the Act the assessing authority imposed purchase tax at the rate of 2 on the purchase of steel scrap and steel ingots made by them during the period April 1 1958 to March 31 1959 for making rolled steel section and selling the same
The appellants filed petitions under article 226 of the Constitution in the High Court for appropriate writs for quashing the orders of the assessing authorities and for prohibiting them from levying purchase tax on the goods purchased and for refund of the tax illegally collected from them
A Division Bench of the High Court dismissed the petitions
Hence the appeals
Appeals Nos 81 of 1965 and 540 of 1965 relate to purchase tax on cotton
The appellants in Civil Appeal No 81 of 1965 are the trustees of Birla Education Trust
They own a cotton and textile mill Bhiwani
They purchase cotton from various dealers in Punjab and outside for the manufacture of yarn and cloth
By in order dated March 11 1962 the District Taxation Officer Hissar imposed purchase tax on the appellants in respect of the cotton purchased by them for the assessment years 1958 59 and 1959 60
The appellant in Civil Appeal No 540 of 1965 is a limited company carrying on the business of producing and selling yarn
For the purpose of its business it acquires cotton from commission agents
It is a registered dealer under the Act
The Excise and Taxation Officer Hissar by his order dated November 561 29 1961 assessed the appellant to purchase tax for the assessment year 1958 59 in respect of the cotton purchased by it and so too on January 27 1962 he had taken proceedings for making assessment to purchase tax for the assessment year 1959 60 in respect of the same commodity
The appellants in both the appeals filed petitions under article 226 of the Constitution in the High Court questioning the validity of the said orders
The said writ petitions were dismissed by a Division Bench of the High Court
Hence the appeals
We shall at first take the points raised which are common to all the appeals and then proceed to consider the points peculiar to some of the appeals
Mr M C Setalvad learned counsel appearing for the appel lants in the batch of appeals relating to tax on purchase of oil seeds raised before us the following points which are common to other appeals  1 Section 5 of the East Punjab General Sales Tax Act 1948 was held to be void on the ground that it conferred essentially legislative power on the provincial Government and therefore the said section was stillborn and that as the said section was the charging section the entire Act was void with the result Act 19 of 1952 which amended section 5 with retrospective effect could not breathe a new life into the said Act
A void Act was non est and therefore could not be brought into force by an amending Act
2 Clause ff of section 2 introduced by Act 7 of 1958 defining purchase subject to the conditions mentioned therein as a taxing event was ultra vires the State Legislature inasmuch as the transaction defined therein was not a sale within the meaning of that expression in entry 52 of List 11 of the 7th
Schedule to the Constitution and was in fact an excise duty inasmuch as it was imposed on the production of oil in the garb of purchase tax
3 The said amendment was also bad in that it made an unreasonable discrimination in the matter of taxation between the same classes of goods based on the character of the purchaser
If the goods were purchased by a manufacturer they were liable to purchase tax and if the same goods were purchased by an ordinary dealer they were not liable to the said tax
4 The amended provision section 2ff was also void because it contravened sections 14 and 15 of the Central Sales tax Act 1956 whereunder sales tax was prohibited to be imposed on the declared goods at more than one stage whereas under the Act it could be imposed both at the purchase point and at the sale point of the transactions entered into by the manufacturer
5 Purchase tax was not leviable on oil seeds as the assessees did not manufacture oil out of the seeds but only produced the oil
We shall now proceed to consider the points seriatim
The provisions relevant to the first two points read thus C1167 6 562 East Punjab General Sales Tax Act 46 of 1948 Section 5
Subject to the provisions of this Act there shall be levied on the taxable turnover every year of a dealer a tax at such rates as the Provincial Government may by notification direct
East Punjab General Sales Tax Second Amendment Act 1952 Act No 19 of 1952
Section 2
Amendment of section 5 of Punjab Act 46 of 1948  In sub section 1 of section 5 of the East Punjab General Sales Tax Act 1948 after the word  rates the following words shall be inserted and shall be deemed always to have been so inserted namely not exceed in two pice in a rupee 
The High Court of Punjab held that section 5 of the Act was void as it gave an unlimited power to the executive to levy sales tax at a rate which it thought lit
But it held that the amendment of section 5 by the Punjab Act 19 of 1952 cured the defect in the said Act and had the effect of giving a new life to it
The first question therefore is whether section 5 of the East Punjab General Sales Tax Act 1948 46 of 1948 as it originally stood was void and the second question is if the said section was void whether the amendment could give life to it
The law on the subject is fairly well settled though difficulties are met in its application to each case
In Corporation of Calcutta vs Liberty Cinema1 on which Mr Ganapati Iyer relied relates to a levy imposed on cinema houses under the Calcutta Municipal Act 33 of 1951
There the majority held that the levy therein was a tax that the fixing of a rate of tax was not of the essence of legislative power that the fixing of rates might be left to a nonlegislative body and that when it was so left to such a body the Legislature must provide guidance for such fixation
The majority he Id in that case that such a guidance was found in the monetary needs of the Municipality for discharging the functions entrusted to it under the Act
Sarkar I speaking for the majority aid thus  It the Municipal Corporation has to perform various statutory functions
It is often given power to decide when and in what manner the functions are to be performed
For all this it needs money and its needs will very from time to time with the prevailing exigen cies
Its power to collect tax however is necessarily 1 19652 SCR4 7 563 limited by the expenses required to discharge those functions
It has therefore where rates have not been specified in the statute to fix such rates as may be necessary to meet its needs
That we think would be sufficient guidance to make the exercise of its power to fix the rates valid
 If this decision is an authority for the position that the Legislature can delegate its power to a statutory authority to levy taxes and fix the rates in regard thereto it is equally an authority for the position that the said statute to be valid must give a guidance to the said authority for fixing the said rates and that guidance cannot be judged by stero typed rules but would depend upon the provisions of a particular Act
To that extent this judgment is binding on us
But we cannot go further and hold as the learned counsel for the respondents asked us to do that whenever a statute define  the purpose or purposes for which a statutory authority constituted and empowers it to levy a tax that statute necessarily contains a guidance to fix the rates it depends upon the provisions of each statute
Learned counsel for the State argued that under article 162 of the Constitution the executive power of the State shall extend to matters with respect to which the Legislature of a State has power to make laws  that is to say the executive power of a State extends to matters mentioned in List 11 of the Seventh Schedule to the Constitution that under article 2661 of the Constitution all the taxes collected will go to the Consolidated Funds of the State that the State has an unlimited power to raise funds by taxation to discharge its vast constitutional duties and that necessarily the amount of tax required would depend upon its needs which can only be known to it
In the said circumstances the argument proceeds  the doctrine of constitutional and statutory needs would afford reasonable guidelines for the Government to fix the rate and that the principle laid down by this Court in the aforesaid decision would equally apply to this case
If this argument be accepted it would mean that every statute conferring a naked power on the Government to impose taxes would be good for in every case the discharge of the constitutional duties by the Government would be deemed to be a sufficient guide for fixing the rate
We cannot accept this argument for three reasons namely 1 the decision of this Court in Calcutta Corporation vs Liberty Cinema1 should he confined only to the provisions of the Calcutta Municipal Act Wherein this Court found a guidance 2 the provisions of the Sale Tax Act including the preamble do not disclose any policy or guidance to the State for fixing the rates and 3 the general 1 19652 SCR 477 564 constitutional power to impose taxes has no relevance for discovering a statutory policy under a particular Act
Nor does the decision of this Court in The State of Madras vs Gannon Dunkerley  Co Madras Ltd1 lend support to the argument so widely advanced by the learned counsel
That case has nothing to do with the fixation of rates of taxes
There section 61 of the Madras General Sales Tax Act 1939 as amended by Madras Act 25 of 1947 provided that no tax will be payable on any sale of goods specified in the schedule to it
Section 62 of that Act authorised the State Government to amend the schedule by notification
The amendment of the Schedule by the State Government was challenged on the ground that section 62 was invalid as it was a delegation of the essential power of legislation of the State Government
Venkatarama Ayyar J speaking for the Court in rejecting that contention observed thus  Now the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws such as the selection of persons on whom the tax is to be laid the rates at which it is to be charged in respect of different classes of goods and the like
 It is not necessary to scrutinize the correctness of this statement having regard to the decisions relied upon for this Court in Corporation of Calcutta vs Liberty Cinema2 accepted it but made it clear that such a power to fix the rates must be supported by some reasonable guidance given under the Act whereunder the said power was conferred
Nor the observations of Rajagopala Ayyangar J in the said decision speaking for the minority lend support to the contentions of the respondents
The decision in Vasantlal Maganbhai Sanjanwala vs The State of Bombay3 raised the question whether section 62 of the Bombay Tenancy and Agricultural Lands Act 1948 Bom 67 of 1948 which enabled the Government to fix the rent payable by a tenant within the maximum limits prescribed thereunder was valid
When it was argued that it was bad because of excessive delegation this Court sustained it on the basis of a legislative policy disclosed by section 123 of the Act
In The Union of India vs Messrs Bhana Mal Gulzari Mal4 this Court rejected the contention that caluse 11B of Iron and Steel Control of Production  Distribution Order 1941 whereunder the Central Government was authorised to issue notification fixing the maximum price of steel was void on the ground of excessive delegation as it found that the said clause only further canalized the policy disclosed in sections 3 and 4 of the Act
1  SCR379 435
2 19652 SCR 477
3 1961 341
4  565 Further citation is unnecessary for the principle of excessive delegation is well settled and the cases are only illustrations of the application of the said principle
The law on the subject may briefly be stated thus  The Constitution confers a power and imposes a duty on the legislature to make laws
The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct
Obvi ously it cannot abdicate its functions in favour of another
But in view of the multifarious activities of a welfare State it cannot presumably work out all the details to suit the varying aspects of a complex situation
It must necessarily delegate the working out of details to the executive or any other agency
But there is a danger inherent in such a process of delegation
An overbur dened legislature or one controlled by a powerful executive may unduly overstep the limits of delegation
It may not lay down any policy at all it may declare its policy in vague and general terms it may not set down any standard for the guidance of the executive it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation
This self effacement of legislative power in favour of another agency either in whole or in part is beyond the permissible limits of delegation
It is for a Court to hold on a fair generous and liberal construction of an impugned statute whether the legislature exceeded such limits
But the said liberal on struction should not be carried by the Courts to the extent of always trying to discover a dormaint or latent legislative policy to sustain an arbitrary power conferred on executive authorities
It is the duty of the Court to strike down without any hesitation any arbitrary power conferred on the executive by the legislature
See Vasantlal Maganbhai Sanjanwala vs The State of Bombay1 at pp
356 357
Under section 5 of the Punjab General Sales Tax Act 1948 as it originally stood an uncontrolled power was conferred on the provincial Government to levy every year on the taxable turnover of a dealer a tax at such rates as the said Government might direct
Under that section the Legislature practically effaced itself in the matter of fixation of rates and it did not give any guidance either under that section or under any other provisions of the Act no other provision was brought to our notice
The 1 566 argument of the learned counsel that such a policy could be gathered from the constitutional provisions cannot be accepted for if accepted
it would destroy the doctrine of excessive delegation
It would also sanction conferment of power by Legislature on the executive Government without laying down any guide lines in the Act
The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legis lative policy or guide lines in that regard
As the Act did not prescribe any such policy it must be held that section 5 of the said Act is it stood before the amendment was void
The next step in the argument of Mr M C Setalvad was that sections 4 5 and 6 of the Punjab Central Sales Tax Act 1948 together formed a group of charging sections and they were so integrally connected with each other that if section 5 was void sections 4 and 6 also fell with it as one was not severable from the other
As the charging sections were the crux of the Act the argument proceeded the whole Act was void and therefore the Act amending section 5 could not revive the Act which was still born
The relevant provisions may now be read
Section 4 1
Subject to the provisions of sections 5 and 6 every dealer except one dealing exclusively in goods declared tax free under section 6 whose gross turnover during the year immediately preceding the com mencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on ill sales effected after coming into force of this Act
Section 5 his already been extracted
Section 61
No tax shall be payable on the sale of goods specified in the first column of Schedule B subject to the conditions and exceptions if any set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax on the sale of goods which are declared tax free from time to time under this section
It will be seen that section 4 is a charging section that section 5 provides for fixation of rates and that section 6 prescribes for exemptions
Section 4 is made subject to sections 5 and 6
IF section 5 is struck out will section 4 become void This will depend upon two questions namely i whether section 5 is a charging section  and ii even if section 4 alone is the charging section
 as it is made subject to section 5 and as the section subject to which it is made was still born whether section 4 on the application of the doctrine of severance becomes void
567 In the context of Income tax Act it was held by this Court in Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth tax Central Calcutta1 that the charging section for the purpose of income tax was section 3 of the Indian Income tax Act 1922 and the annual Finance Acts only gave the rate for quantifying the tax
Section 3 of the said Income tax Act read Where any Central Act enacts that income tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of this Act in respect of the total income of the previous year of every individual Hindu undivided family company and local authority and of every firm and other association of persons or the partners of the firm or tile members of tile association Individually
 Section 2 of tile Finance No  read 1 Subject to the provisions of subsections 2 3 4 and 5 for the year beginning on the 1st day of April 1957 aincome tax shall be charged at the rates specified in Part 1 of the First Schedule and in the cases to which Paragraphs A B and C of that Part apply shall be increased by a surcharge for purposes of the Union and a special surcharge on unearned income calculated in either case in the manner provided therein It was argued that the liability to tax did not arise till the Finance Act was made and the tax quantified
Dealing with this question this Court by majority observed A liability to pay income tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data
 The only difference between Income tax Act and the present Act is that while in the Income tax Act section 3 thereof does not expressly make the liability subject to the provisions of tile Finance Act which fixes the rate under the Sales tax Act in question section 4 thereof in terms is made subject to section 5
But under both the Acts there is a clear distinction between chargeability and the quantification of tax
While it is true that the tax cannot be realised without it being quantified the non quantification of the liability will not destroy the liability tinder the clearing section
The liability has to be distinguished from its enforceability
It cannot be said and indeed it Is not said that the Income tax Act has no legal existence till the Finance Act is made though till the Finance 1 19662 SCR 688 78
568 Act is made it cannot be enforced
But reliance is placed on section 67B of the Income tax Act in support of the contention that its existence in the statute book keeps the Act alive for the rate prescribed by the previous Finance Act is applicable till the new Finance Act is passed
But it will be noticed that the Court s decision was not based on the existence of the said provision but on that of the charging section itself
It follows that striking out section 5 does not make section 4 void though till an appropriate section is inserted it remains unenforceable
The decision of this Court in B Shama Rao vs The Union Territory of Pondicherry is clearly distinguishable
There subsection 1 of section 2 of the Pondicherry General Sales Tax Act 10 of 1965 provided that  The Madras General Sales Tax Act 1959 No 1 of 1959 hereinafter referred to as the Act as in force in the State of Madras immediately before the commencement of this Act shall
extend to and come into force in the Union of Territory of Pondicherry subject to the following modifications and adaptations 
Section 12 of the said Act provided that the Act would come into force on such date as the Government by notification may appoint
The effect of the section was that the Madras Act as it stood on the date if the notification issued would be in force in the Union Territory of Pondicherry
Indeed it turned out that the Madras Act was ended before the said notification
This Court held that there was a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras legislature and for that reason the said sections were void or stillborn
It was argued that the Act could not be said to be still born as it contained certain provisions independent of the Madras Act viz a section which provided for the appellate tribunal and the schedule
But it was pointed out that the core of the taxing statute was in the charging section and that the remaining sections bad no independent existence
In the present case the charging section was intact and what was struck out was only the section providing for rates
It cannot therefore be said that when section 5 was struck out section 4 or other sections fell with it
It was then contended that even if the whole Act was not stillborn section 5 was non est that the amending Act did not insert a new section 5 but purported to amend the earlier section 5 which was not in existence
Now under the East Punjab General Sales Tax Second Amendment Act 1952 Act No 19 of 1952 section 5 of the East Punjab General Sales Tax Act 1948 was amended
Section 2 of the said amending Act says 1  569 lm15 In sub section 1 of Section 5 of the East Punjab General Sales Tax Act 1948 after the word rates  the following words shalt be inserted and shall be deemed always to have been so inserted namely  not exceeding two pice in a rupee  No doubt in terms the section inserts the words not exceeding two pice in a rupee in section 5
If section 5 is inserted in the Act by the Amending Act with the said words added there cannot possibly be any objection for that would be an amendment of an existing Act
But in substance the amendment brings about the same effect
The words shall be deemed always to have been so inserted indicate that in substance section 5 as amended is Inserted in the Act with retrospective effect
Even so it wits contended that section 5 as amended only gave the maximum rate and did not disclose any policy giving guidance to the executive for fixing any rate within that maximum
Here we are concerned with sales tax
If the Act had said 2 pice In a rupee it would be manifest that it was a clear guidance
But as the Act applies to sales or purchases of different commodities it had become necessary to give some discretion to the Government in fixing the rate
Conferment of reasonable area of discretion by a fiscal statute has been approved by this Court in more than me decision  see Khandige Sham Bhat vs The Agricultural Income tax Officer1
At the same time a larger statutory discretion placing a wide gap between the minimum and the maximum rates and thus enabling the Government to fix an arbitrary rate may not be sustained
In the ultimate analysis the permissible discretion depends upon the facts of each case
The discretion to fix the rate between I pice and 2 pice in a rupee is so insignificant that it is not possible to hold that it exceeds the permissible limits
It follows that section 5 of the Act as amended is valid
The next argument is that section 2ff inserted in the Punjab General Sales Tax Act 1948 by the East Punjab General Sales Tax Amendment Act 1958 Act No 7 of 1958 Lind amended by Amending Act 13 of 1959 is void
The said clause ff as amended by Act 13 of 1959 reads  Purchase  with all its grammatical or cognate expressions means the acquis ition of goods specified in Schedule C  for use in the manufacture of goods for sale for cash or deferred payment or other valuable considera tion otherwise than under a mortgage hypothecation charge or pledge
 The first limb of the argument is that the definition of purchase is more comprehensive than the definition of sale under the Indian and therefore the State Legislature was 1  570 incompetent to make a law under entry sale or purchase in List 11 of the 7th Schedule to the Constitution
The constitutional position is well settled
Entry 54 of List II of the 7th Schedule to the Constitution reads  Taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List 1 In The State of Madras vs Gannon Dunkerley  Co Madras Ltd1 Venkatarama Aiyer J speaking for the Court observed  Thus according to the law both of England and India in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course presupposes capacity to contract that it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods
Unless these elements are present there can be no sale
Thus if merely title to the goods passes but not as a result of any contract between the parties express or implied there is no sale
 This Court also held that the State Legislature by enlarging the definition of sale could not include transactions which were not sales according to the well established concepts of law tinder the Law of Contract or the  see Sales tax Officer vs Budh Prakash 2  and George Oakes vs State of Madras3
Bearing that in mind let us look at clause ff in section 2 of the Principal Act in which the said clause was inserted
The ingredients of the definition of purchase are as follows  i there shall be acquisition of goods ii the acquisition shall be for cash or deferred payment or other valuable consideration ii the said valuable consideration shall not be other than under a mortgage hypothecation charge or pledge
Clause h of  section 2 defines thus sale means an transfer of property in goods other than goods specified in Schedule C for cash or deferred payment or other valuable consideration but does not include a mortgage hypothecation charge or pledge
If we turn to the  section 4 thereof define contract of sale of goods
It reads  Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property ill goods to the buyer for a price 1  397 398
2 AIR 1964 SC 459 3 A 1
R 571 The essential requisite of sale are i there shall be a transfer of property or agreement to transfer property by one party to another and ii it shall be for consideration of money payment or promise thereof by the buyer
A sale and a purchase are different aspects of the same transaction
If we look at it from the standpoint of a purchaser it is purchase and if we look at it from the standpoint of the seller it is a sale
Whether purchase or sale it shall have the said ingredients both in common law and under the Indian Contract Act Price  has been defined in the to mean money consideration for the sale of goods  see section 210 of the Indian 
It will therefore be seen that the definition of purchase  in the Act prima facie appears to be wider in scope than sale 
While transfer of goods from one person to another is the ingredient of sale  in general law acquisition ion of goods which may in its comprehensive sense take in voluntary as well as involuntary transfers is an ingredient of purchase  in clause ff
While price  ie money consideration is the ingredient of sale  cash deferred payment or any valuable consideration is an ingredient of Purchase 
But a closer scrutiny compels us to give a restricted meaning to the expression acquisition and price
Acquisition is the act by which a person ac quires property in a thin 
Acquire is to become the owner of the property
One can therefore acquire a property either by voluntary or involuntary transfer
But the Sales Tax Act applies only to sale as defined in the Act
Under clause h of section 2 of the Act it is defied as a transfer of property
As purchase is only a differed aspect of sale looked at from the stand point of the purchaser and as the Act imposes tax at different points in respect of sales having regard to the purpose of the ale it is unreasonable to assume that the Legislature contemplated different categories of transactions when the taxable event is it the purchase point
Whether it is sale or purchase the transaction is the same
If it was a transfer inter vivos in the case of a sale it must equally be so in the case of a purchase
Context consistency and avoidance of anomaly demand a restricted meaning
That it must only mean transfer is also made clear by the nature of the transactions excluded from the acquisition namely mortgage hypothecationcharge or pledge all of them belong to the species of transfer
We must thereforehold that the expression acquisition in clause ff of section2 of the Act means only transfer
coming to the expression price
it is no doubt defined in the as money consideration
Cash or deferred payment in clause ff of section 2 of the Act satisfied the said definition
The expression valuable consideration has a wider connotation but the said expression is also used in the same collocation in the definition of sale in section 2h of the Act
The said expression must bear the same meaning in clause 5 72 ff and clause h of section 2 of the Act
It may also be noticed that in most of the Sales Tax Acts the same three expressions are used
It has never been argued or decided that the said expression means other than monetary consideration
This consistent legislative practice cannot be ignored
The expression valuable consideration takes colour from the preceding expression cash or deferred payment
If so it can only mean some other monetary payment in the nature of cash or deferred payment
We therefore hold that clause ff of section 2 of the Act is not void for legislative incompetence
Another argument to invalidate clause ff of section 2 of the principal Act may also be noticed
It is said that that clause offends article 14 of the Constitution on the ground that by reason of the said definition the same goods if purchased by a manufacturer would be taxed but they would not be taxed if purchased by a person other than a manufacturer
But a close scrutiny of clause ff of section 2 discloses that there is a reasonable classi fication in the said definition
The raw goods purchased by a manufacturer are transformed on manufacture into some other goods and that is the reason why the Legislature taxes the goods before they lose their identity
But where no manufacturer intervenes there is no such metamorphosis and therefore the taxable event is the sale
There is certainly a reasonable relation between the object of the statute and the differences between the two categories of transactions
The next argument turns upon the interpretation of clause ff
The argument is to come Linder the definition of purchase it is not enough that the acquisition of goods shall be for cash etc
but that the acquisition shall be for use in the manufacture of goods for sale for cash etc
On this construction it is argued that the tax levied was excise duty and therefore beyond the competence of the State Legislature
The contention is that the tax on the purchase was in connection with the manufacture of goods and therefore an excise duty
There is an essential distinction between the two imposts  while excise duty is in respect of manufacture of goods the sales tax is upon the sale of the goods
The question therefore is whether under the Act the purchase tax is imposed on the sale of the goods or in connection with the manufacture of goods
The decisions of this Court establish that in order to be in excise duty a the levy must be upon goods  and b the taxable event must be the manufacture or production of goods  see Messrs Shinde Brothers vs The Deputy Commissioner Raichur1 The tax has no nexus with the manufacture of goods
The purpose for which the goods are purchased is only relevant for fixing the 1 Civil Appeals No 1580 1586 1588 and 1590 1600 of 1966 decided on 26 9 1966
573 taxable event but the tax is on the purchase of the goods
That taxable event is fixed before the goods are actually manufactured
We therefore hold that the tax under the Act is a purchase tax and not an excise duty
Then it is contended that while section 15 of the Act 74 of 1956 imposes a restriction on the State not to tax at more than one stage the amending Act by introducing the definition of purchase enables the State to tax the same goods at the purchase point and at the sale point
But this argument misses the point that goods purchased and the goods sold are not identical ones
Manufacture changes the identity
Therefore the same goods are not taxed at two stages
The last argument is that the said definition only takes in the purchase of goods for use in the manufacture of goods but tax is imposed on the purchase of goods for producing oil
To state it differently oil is not manufactured out of oil seeds but only produced
Reliance is placed upon the user of two words in the Act viz manufacturing or processing in the proviso to sub section 2 of section 4 and sub section 5 thereof and the expression edible oils produced in entry 57 of Schedule B to the Act and a con tention is raised that the Act itself makes a distinction between manufacturing and processing and manufacture and production and therefore oil is not manufactured but only produced from oil seeds
Support is sought to be derived for this argument from the decision of this Court in Union of India vs Delhi Cloth  General Mills1
But a perusal of the judgment shows that this Court only held that refined oil produced out of seeds was only an intermediate stage in the manufacture and was therefore not liable to excise duty
On the other band the dictionary meaning of manufacture is transform or fashion raw materials into a changed form for use
When oil is produced out of the seeds the process certainly transforms raw material into different article for use
We cannot therefore accept this contention
Now coming to Civil Appeals Nos 39 to 43 of 1965 the first additional point raised is that when iron scrap is converted into rolled steel it does not involve the process of manufacture
It is contended that the said conversion does not involve any process of manufacture but the scrap is made into a better marketable commodity
Before the High Court this contention was not pressed
That apart it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity viz rolled steel sections
During the process the scrap iron loses its identity and becomes a new marketable commodity
The process is certainly one of manufacture
1 1963 Supp 1 SCR 586 574 The next argument is that the Act is in conflict with section 15 of the  inasmuch as it enables the levy of sales tax at more than one stage
In these and connected appeals we are concerned only with two periods the first period upto October 31 1958 and the second period from November 1 1958 to March 31 1960
It is therefore necessary to notice the relevant provisions governing the said two periods
The relevant part of section 15 of the 74 of 1956 as amended by Central Sales Tax Amendment Act 16 of 1957 reads thus  Every sales tax law of a State shall in so far as it imposes or authorises the imposition of a tax on the ale or purchase of declared goods be subject to the following restrictions and conditions namely a the tax payable under that law in respect of any sale or purchase of such goods inside the State shall be levied only in respect of the last sale or purchase inside the State and shall not exceed two per cent of the sale or purchase price b notwithstanding anything contained in clause a no tax shall be levied in respect of the last sale or purchase inside the State if the declared goods purchased are intended for sale in the course of inter State trade or commerce
Explanation
The expression last sale or purchase inside the State means the transaction in which a dealer registered under the sales tax law of the State i sells to or purchases from another such dealer declared goods for use by the purchaser in the manufacture of goods for sale or for use by the purchaser in the execution of any contract or ii purchases declared goods from another such dealer for sale to a dealer not registered under the sales tax law of the State or to a consumer in the State This section was amended by the Central Sales Tax Amend ment Act 31 of 1958 with effect from October 1 1958
The relevant part of the amended section reads  Every sales tax law of a State shall in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods be subject to the following restrictions and conditions namely athe tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceedtwo per cent
of the sale or purchase price there 575 of and such tax shall not be levied at more than one stage b Where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of interstate trade or commerce the tax so levied shall be refunded to such person in such manner and subject to such conditions is may be provided in any law in force in that State
While section 15 of the before the amendment described the stage at which the purchase tax can be levied section 15 after the amendment only declares that it cannot be levied at more than one stage
This Court in Ms Modi Spinning  Weaving Mills Co Ltd vs Commissioner of Income tax Punjab  Anr
1 observed as follows  The meaning or the intention of clause 3 of article 286 is not to destroy all charging sections in the Sales Tax Acts of the States which are discrepant with section 5a of the  but to modify them in accordance therewith
The law of the State is declared to be subject to the restrictions and conditions contained in the law made by Parliament and the rate in the State A ct would pro tanto stand modified
The effect of article 2863 is now brought out by the second proviso to section 51
But this proviso is enacted out of abundant caution and even without it the result was the same
 The effect of this judgment is that the stage prescribed under section 15 of the before the amendment and the prohibition against taxation at more than one stage contained in the amended section would automatically control the provisions of the Punjab Genet at Sales Tax Act 1948
With the result upto October 1 1958 tinder the State Sales Tax Act a tax could be levied only in respect of purchase of declared goods inside the State and only on the purchase made by a dealer of goods for use by him in the manufacture of goods and from October 1 1958 the State can only levy tax at one stage
For the second period the Central Act by its own force did not fix the stage
Pursuant to the provisions of section 15 of the  before it was amended Act 7 of 1958 added clause ff to section 2 of the Principal Act fixing the same stage indicated by section 15 of the Central Act ie the stage when the purchase is made by a dealer for use in the manufacture of goods
This section was amended by Act 13 of 1959 and Act 24 of 1959
Under the latter amendment in clause ff of section 2 for the words goods for use in the manufacture of goods for sale the 1 576 words goods specified in Schedule C  for use in the manufacture of goods for sale were substituted that is to say the stage for taxation prescribed in the earlier definition was amended
It may be recalled that under the  as amended the description of the stage was omitted but that does not affect the question for that description is maintained even under the amended clause ff
It follows from the said discussion that the Punjab General Sales Tax Act during the crucial period which is the subject matter of these appeals in terms fixed a stage for taxation ie the stage of purchase by a dealer for use in the manufacture of goods
There are therefore no merits in this contention either
Now coming to Civil Appeals Nos 81 of 1965 and 540 of 1965 three additional points are raised by Mr Desai namely i by including in the term purchase read with the definition of dealer where there is acquisition of cotton through commission agents the State Legislature has exceeded its legislative power under entry 54 of List 11 of Schedule 7 to the Constitution ii during the relevant period tax was leviable on cotton without fixing any stage and at more than one stage in violation of section 15 of the  and iii there is no rational basis to single out the three items namely cotton oil seeds and resin for imposition of purchase tax and therefore the relevant provisions offend article 14 of the Constitution
We have already held in another context that there are no merits in the second point
The first point need not detain us as in the High Court no specific point was raised in that regard
On the third point also no adequate material was placed in the court below and therefore it does not call for our consideration
In the result the appeals are dismissed with costs
One hearing fee RKPS Appeals dismissed


Summary:
Section 5 of the East Punjab Sales Tax Act 1948 as originally enacted conferred on the Government power to levy tax at such rates as the Government might fix
The section was amended by Act 18 of 1952 with retrospective effect fixing the rate of tax at not exceeding two piece in a rupee
Section 2ff of the Act as amended by Act 13 of 1959 define  purchase as the acquisition of the goods for use in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage hypothecation charge or pledge
The appellants  petition in the High Court challenging the imposition of purchase tax for the years 1958 59 and 1959 60 on the purchase of oil seeds steel scrap and cotton for manufacture of goods for sale were dismissed and they appealed to this Court
Mean while the High Court had considered the validity of the Act in a Sales Tax Reference and declared section 5 as it originally stood void
In this Court it was contended  i since section 5 as originally enacted was declared voidthat being the charging section the entire act was void and the Amending Act of 1952 could not revive an Act which was non est and ii section 2ff was invalid for want of legislative competence
HELD  i Section 5 as it stood before the amendment was void but the section as amended by the Amending Act of 1952 is valid
An Act conferring a power to fix rates of taxation must lay down clear legislative policy or guide lines in that regard and the doctrine of constitutional and statutory needs would not afford reasonable guidelines in the fixation of such rates
There was nothing in the provisions of the Act including the preamble disclosing any policy or guidance to the State for fixing rates
Section 5 as it stood before the Amendment conferred on the Government an uncontrolled power in the matter of fixation of rates and was therefore void
565 G 566 B 569 F Corporation of Calcutta vs Liberty Cinema  explained
State of Madras vs Gannon Dunkerlev  Co Madras Ltd   435 Vasantlal Maganbhai Sanjanwala vs State of Bombay
558  and The Union of India vs Ms Bhana Mal Gulzari Mal   referred to
Although section 5 was void the entire Act was not void
Section 4 is the Charging section and Section 5 dealt only with the quantification of tax that is the charging section was intact and what was struck down was only the section providing for rates
The fact that section 4 is made subject to section 5 does not render the former void on the principle of non severability because under the Act there is a clear distinction between chargeability and the quantification of tax
Therefore striking out section 5 only made section 4 unenforceable
The amendment of section 5 has in substance the effect of amending an existing Act
567 G H 568 F G 569 B C B Shama Rao vs The Union Territory of Pondicherry 1967 2 SCR distinguished
Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth Tax Central Calcutta   referred to
Conferment of a reasonable area of discretion by a fiscal statute is permissible and the discretion to fix the rate between 1 pice and 2 pice cannot be said to exceed the permissible limits
569D F Khandige Sham Bhat vs The Agricultural Income Tax Officer   referred to
ii Clause ff of section 2 is not void for want of legislative competence
Although the words acquisition and valuable consideration in the definition of purchase in section 2ff of the Act indicate prima facie that this definition is wider in scope than the definition sale these expressions in the context must be given a restricted meaning
The expression acquisition in the definition means only transfer and the expression valuable consideration takes colour from the preceding expression cash or deferred payment and can only mean some other monetary payment in the nature of cash or deferred payment
571 F G 572 B The State of Madras vs Gannon Dunkerley  Co Madras Ltd   Sales Tax Officer vs Budh Prakash AIR and George Oakes vs State of Madras AIR  referred to
Purchase tax under the Act is leviable on the purchase of goods and not in respect of manufacture of goods and therefore is not an excise duty
The purpose for which goods are purchased is only relevant for fixing the taxable event and the taxable event is fixed before the goods are actually manufactured
572 H 573 B Ms Shinde Bros vs The Deputy Commissioner Raichur CAs
1580 1586 and 1590 1600 of 1955 decided on 26 9 1966 referred to
The Act does not enable levy of tax on the same goods at more than one stage and therefore is not in conflict with section 15 of the Central Sales Tax Act 1596
Manufacture changes the identity and the goods purchased and the goods sold are not identical and therefore the same goods are not taxed at two stages
Further cl
ff of section 2 of the Act during
the periods relevant to the present case in terms fixed the stage for taxation ie the stage of purchase by a dealer for use in the manufacture of goods
573 B C 576 B 559 The fact that the same goods when purchased by a manufacturer would be taxed but would not be taxed when purchased by a person other than a manufacturer would not violate article 14 of the Constitution as section 2ff discloses a reasonable classification
572C E