Case: Tax and Sales Tax, South Zone, Quilon Vs. Deputy Commissioner of Agricultural Income-Aluminium Industries Limited Kanan Devan Hill Produce Company Limited  Intervener

RAMASWAMI, J.1. These appeals are brought by special leave from the judgment of the Kerala High Court in Tax Revision Case Nos. 10 and 11 of 1967 decided on July 23, 1968.2. The Aluminium Industries Ltd. is the respondent in both the cases. In the first case, the respondent was finally assessed for the year 1960-61 under the Central Sales Tax Act, 1956, by the Sales officer by his order dated October 18, 1962. For the assessment year 1961-62 the respondent was assessed under the same Act by the Sales Tax Officer on October 29, 1962. In both these assessments, the respondent made a claim for deduction of the trade discount paid to its customers from its gross turnover in determining the taxable turnover. This claim was allowed by the Sales Tax Officer. The Deputy Commissioner of Agricultural Income-tax and Sales Tax took the view that the claim was not admissible under law. Accordingly, he took action under section 15(1) of the General Sales Tax Act, 1125, and revised the orders of the Sales Tax Officer by disallowing the above claim. The assessee took the matter in appeal before the Appellate Tribunal which held that the irregularity sought to be rectified was one relating to escaped turnover and that the order passed by the Deputy Commissioner on June 23, 1966, was clearly beyond four years from the assessment year 1960-61 and was barred by limitation. The Appellate Tribunal did not decide the other question, namely, whether the trade discount was an allowable deduction and therefore no turnover had escaped assessment. The Deputy Commissioner took the matter in revision to the High Court and argued that the Appellate Tribunal was not justified in holding that the irregularity sought to be rectified was assessment of escaped turnover and as such the same was barred by limitation. The High Court did not decide the question as to whether the order impugned was barred by limitation. On the other hand, the High Court examined the question raised by the assessee on the merits as to whether the "trade discount" was a permissible deduction in assessments under the Central Sales Tax Act. The High Court held that in view of section 9(3) of the Central Sales Tax Act read with rule 7(1)(a) of the General Sales Tax Rules, 1950, "all deductions allowed under the State law to be made from the gross turnover in determining the net turnover shall be liable to deduction in determining the taxable turnover under the Central Sales Tax Act, 1956." The High Court accordingly dismissed the tax revision cases.It is necessary at this stage to reproduce the relevant statutory provisions and rules. Section 8(2) of the Central Sales Tax Act, 1956, states :"(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1) -(a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State; and(b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent., or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher;and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law."Section 9 provides :"(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce whether such sales fall within clause (a) or clause (b) of section 3 shall be levied and collected by the Government of India in the manner provided in sub-section (3) in the State from which the movement of the goods commenced :Provided that, in the case of a sale of goods during their movement from one State to another being a sale subsequent to the first sale in respect of the same goods, the tax shall, where such sale does not fall within sub-section (2) of section 6, be levied and collected in the State from which the registered dealer effecting the subsequent sale obtained the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods.(2) The penalty imposed upon any dealer under section 10A shall be collected by the Government of India in the manner provided in sub-section (3) -(a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods;(b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed.(3) The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax, including any penalty, payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, appeals, reviews, revisions, references, penalties and compounding of offences, shall apply accordingly :Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf, make necessary provision for all or any of the matters specified in this sub-section, and such rules may provide that a breach of any rule shall be punishable with fine which may extend to five hundred rupees; and where the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues."Section 15 provides as follows :"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 :(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent. of the sale or purchase price thereof, 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 inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in the State."Section 2(h) defines sale price to mean :"sale price means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged;"Section 2(j) states as follows :"turnover used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in the prescribed manner :"Rule 7(1)(a) of the General Sales Tax Rules, 1950, is to the following effect :"(1) The tax or taxes under section 3 or 5 or the notifications under section 6 shall be levied on the net turnover of a dealer. In determining the net turnover, the amounts specified in clauses (a) to (k) shall, subject to the conditions specified therein, be deducted from the gross turnover of a dealer :(a) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount."3. In dismissing the tax revision cases the High Court followed the decision of this court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons ([1965] 16 S.T.C. 231). In that case the assessee, a dealer in powerloom and handloom textiles was assessed to tax for the year 1957-58 under section 9 of the Central Sales Tax Act, 1956, as it stood before its amendment by the Central Sales Tax (Second Amendment) Act, 1958. The assessee contended that as he was not the first or the earliest of successive dealers in respect of the turnover and therefore not liable to be taxed under the Mysore Sales Tax Act, 1957, he could not also be taxed under the Central Sales Tax Act, 1956. The High Court accepted the plea on the ground that by virtue of section 8(2) of the Central Act, any exemption given by a State Act or the point determined by it at which a sale was to be taxed applied also to assessments under the Central Act. On appeal to this court, it was held by the majority of Judges that the expression "levied" in section 9(1) of the Central Act referred to the expression "levied" in section 5(3)(a) of the State Act and therefore the Central Act had not made a departure in the manner of levy of tax on the specified goods which were taxed only at a single point under the State Act. In his dissenting judgment Shah, J., held that the use of the expression "in the same manner" in section 8(2) of the Central Act has not the effect of assimilating the procedural and the substantive provisions relating to the imposition, levy and collection of tax as are provided by the State law in the matter of collection of tax under the Central Act. Under sub-sections (1) and (2) of section 9 of the Central Act the power conferred upon the authority competent to assess the tax in the same manner as the tax on the sale or purchase of goods under the general sales tax law does not include the power to admit to exemptions provided by the State law inter-State sales taxable under the Central act. The legal position has, however, been changed as a result of the issue of the Central Sales Tax (Amendment) Ordinance, 1969 (No. 4 of 1969) which was promulgated on June, 9, 1969.Clause 3 of the Ordinance states :"Amendment of section 2. - In section 2 of the principal Act, in clause (j), for the words and determined in the prescribed manner, the words and determined in accordance with the provisions of this Act and the rules made thereunder shall be, and shall be deemed always to have been substituted."Clause 6 provides :"Substitution of new section for section 9. - For section 9 of the principal Act, the following section shall be, and shall be deemed always to have been, substituted, namely :-9. Levy and collection of tax and penalties. - (1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of sub-section (2), in the State from which the movement of the goods commenced :Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods, the tax shall, where such sale does not fall within sub-section (2) of section 6, be levied and collected in the State from which the registered dealer effecting the subsequent sale obtained or, as the case may be, could have obtained, the form prescribed for the purposes of clause (a) of sub-section (4) of section 8 in connection with the purchase of such goods.(2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindi undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, rebates, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly :rovided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf, make necessary provision for all or any of the matters specified in this sub-section.(3) The proceeds in any financial year of any tax, including any penalty, levied and collected under this Act in any State (other than a Union territory) on behalf of the Government of India shall be assigned to that State and shall be retained by it; and the proceeds attributable to Union territories shall form part of the Consolidated Fund of India."Clause 9 provides :"Validation of assessments, etc. - (1) Notwithstanding anything contained in any judgment, decree or order of any court or other authority to the contrary, any assessment, re-assessment, levy or collection of any tax made or purporting to have been made, any action or thing taken or done in relation to such assessment, re-assessment, levy or collection under the provisions of the principal Act before the commencement of this Ordinance, shall be deemed to be as valid and effective as if such assessment, re-assessment, levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Ordinance and accordingly -(a) all acts, proceedings or things done or taken by the Government by any officer of the Government or by any other authority in connection with the assessment, re-assessment, levy or collection of such tax shall, for all purposes, be deemed to be, and to have always been, done or taken in accordance with law;(b) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of any such tax, and(c) no court shall enforce any decree or order directing the refund of any such tax.(2) For the removal of doubts, it is hereby declared that nothing in sub-section (1) shall be construed as preventing any person -(a) from questioning in accordance with the provisions of the principal Act, as amended by this Ordinance, any assessment, re-assessment, levy or collection of tax referred to in sub-section (1), or(b) from claiming refund of any tax paid by him in excess of the amount due from him by way of tax under the principal Act as amended by this Ordinance."These two clauses have been made expressly retrospective and the result, therefore, is that the law as stated in the majority decision of this court in Lakshminarasimhiahs case ([1965] 16 S.T.C. 231) has been superseded.4. On behalf of the interveners, Mr. Narasaraju raised a constitutional objection that the Ordinance was in the first place violative of article 19 as it was made retrospective and therefore constituted an unreasonable restriction and secondly that it is violative of article 14 of the Constitution. It is not open to the parties in this case to challenge the constitutional validity of the Ordinance in view of the decision of this court in K. S. Venkataraman & Co. v. State of Madras ([1966] 2 S.C.R. 229; 17 S.T.C. 418). It was held by the majority of the Judges in that case that the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal are all creatures of the Income-tax Act and whether the provisions of the Act are good or bad is not their concern. As the Appellate Tribunal is a creature of the statute it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act and the question of ultra vires is foreign to the scope of its jurisdiction. As no such question can be raised or can arise on the Tribunals order, the High Court cannot possibly give any decision on the question of ultra vires. Similarly an appeal to this court under section 66A(2) of the Act does not enlarge the scope of the jurisdiction for this court can only do what the High Court can. Mr. Narasaraju conceded that in view of this decision it is not open to him to challenge the constitutional validity of the Ordinance in the present appeals.

Decision:
1[ds]In dismissing the tax revision cases the High Court followed the decision of this court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons ([1965] 16 S.T.C.legal position has, however, been changed as a result of the issue of the Central Sales Tax (Amendment) Ordinance, 1969 (No. 4 of 1969) which was promulgated on June, 9,two clauses have been made expressly retrospective and the result, therefore, is that the law as stated in the majority decision of this court in Lakshminarasimhiahs case ([1965] 16 S.T.C. 231) has beenbehalf of the interveners, Mr. Narasaraju raised a constitutional objection that the Ordinance was in the first place violative of article 19 as it was made retrospective and therefore constituted an unreasonable restriction and secondly that it is violative of article 14 of the Constitution.It is not open to the parties in this case to challenge the constitutional validity of the Ordinance in view of the decision of this court in K. S. Venkataraman & Co. v. State of Madras ([1966] 2 S.C.R. 229; 17 S.T.C. 418). It was held by the majority of the Judges in that case that the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal are all creatures of the Income-tax Act and whether the provisions of the Act are good or bad is not their concern. As the Appellate Tribunal is a creature of the statute it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act and the question of ultra vires is foreign to the scope of its jurisdiction. As no such question can be raised or can arise on the Tribunals order, the High Court cannot possibly give any decision on the question of ultra vires. Similarly an appeal to this court under section 66A(2) of the Act does not enlarge the scope of the jurisdiction for this court can only do what the High Court can. Mr. Narasaraju conceded that in view of this decision it is not open to him to challenge the constitutional validity of the Ordinance in the presentis not open to the parties in this case to challenge the constitutional validity of the Ordinance in view of the decision of this court in K. S. Venkataraman & Co. v. State of Madras ([1966] 2 S.C.R. 229; 17 S.T.C. 418). It was held by the majority of the Judges in that case that theOfficer, the Appellate Assistant Commissioner and the Appellate Tribunal are all creatures of theAct and whether the provisions of the Act are good or bad is not their concern. As the Appellate Tribunal is a creature of the statute it can only decide the dispute between the assessee and the Commissioner in terms of the provisions of the Act and the question of ultra vires is foreign to the scope of its jurisdiction. As no such question can be raised or can arise on the Tribunals order, the High Court cannot possibly give any decision on the question of ultra vires. Similarly an appeal to this court under section 66A(2) of the Act does not enlarge the scope of the jurisdiction for this court can only do what the High Court can. Mr. Narasaraju conceded that in view of this decision it is not open to him to challenge the constitutional validity of the Ordinance in the presentappeals.For the reasons already expressed we hold that these appeals should be allowed and the judgment dated July 23, 1968, of the Kerala High Court in Tax Revision Cases Nos. 10 and 11 of 1967 should be set aside. We also set aside the orders passed by the Appellate Tribunal and the Deputy Commissioner of Sales Tax and the Sales Tax Officer and direct that the matter should go back to the Sales Tax Officer forin accordance with law.