Case: Hindustan Lever Limited And Another V State Of Maharashtra And Another Vs.

92B of List I is to be given the widest interpretation, as it should be, it would be clear that as a result of the constitutional changes introduced by the Forty-sixth a amendment in article 269 read with the entry, the tax on consignment of goods now comes within the exclusive legislative field of Parliament The true test to find out what is the pith and substance of the legislation is to ascertain the true intent of the Act which will determine the validity of the Act. If Parliament, in exercise of its plenary power under entry 92B of List I, imposes any tax on the despatch or consignment of goods, Parliament will be competent to do so. It is, therefore, not possible to accept the argument that the chargeable event was lying dormant and is activated only on the occurrence of the event of despatch. The argument on the construction of the enactment is misconceived. The charging event is the event the occurrence of which immediately attracts the charge. The taxable event cannot be postponed to the occurrence of the subsequent condition. 31. In that event it would be the subsequent condition the occurrence of which would attract the charge which will be the taxable event. If that is so, then it is a duty on despatch. In that view of the matter, this charge cannot be sustainedAs mentioned hereinbefore, the section has been challenged as being violative of article 14 of the Constitution. This attack is based on the discrimination between the two types of taxes but, in the way we have construed the section, in our opinion, this question does not survive. It was further submitted by Dr. Pal that section 13AA of the Act is violative of article 301 of the Constitution. It makes a discrimination between the dealer/manufacturer who despatches the goods outside the State and other dealers/manufacturers. Both the dealers/manufacturers purchase the goods on payment of purchase tax and use them in the manufacture of taxable goods. The incidence of additional tax on the purchase of goods is attracted only when such manufactured goods are despatched outside the State. If a dealer/manufacturer has to despatch the goods outside the State, he has to pay a higher rate of tax and thus lie is discriminated against as compared to the other dealer/manufacturer who purchases the raw material on payment of 4 per cent. purchase tax, but despatches the raw material straightaway outside the State and uses them in the manufacture of goods outside the State. The High Court held that there was no violation of article 301 of the Constitution. Reference was made to the decision of this Court in Atiabari Tea Co. Ltd. v. State of Assam[1961] 1 SCR 809 , Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491 , Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 ; [1968] 1 SCR 705 , State of Madras v. Nataraja Mudaliar (N. K. ) [1968] 22 STC 376 ; [1968] 3 SCR 829 and State of Kerala v. A. B. Abdul Kadir [1970] 1 SCR 700 . 32. One has to determine : does the impugned provision amount to restriction directly and immediately on the trade or commerce movement ? As was observed by this court in Kalyani Stores V. State of Orissa [1966] 1 SCR 865 , imposition of a duty or tax in every case was not tantamount perse to any infringement of article 301 of the Constitution. Only such restrictions or impediments which directly or immediately impede free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301. A tax in certain cases may directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and its own setting of time and circumstances. Unless the court first comes to the finding or, the available material whether or not there is an infringement of the guarantee under article 301, the further question as to whether the statute is saved under article 304(b) does not arise. The goods taxed do not leave the State in the shape of raw material, which change their form in the State itself and there is no question of any direct, immediate or substantial hindrance to a freeflow of trade. On the evidence adduced, we are in agreement with the High Court that the challenge to the imposition in the background of article 301 cannot be sustained and, therefore, no question whether such imposition is saved under article 304(b) of the Constitution arisesIn the aforesaid view of the matter and for the reasons mentioned hereinbefore, it must be held that so far as the appeals in respect of the Haryana Act are concerned, the High Court was right in the view it took in Goodyear India Ltd.s case [1983] 53 STC 163 (P & H), as well as the views expressed by the High Court in Bata India Ltd. v. State of Haryana [1983] 54 STC 226 (P & H), are correct and are affirmed. The views of the High Court expressed in Des Raj Pushap Kumar Gulatis case [1985] 58 STC 393 (P & H) [FB] are incorrect for the reasons mentioned herein before. The last mentioned judgment and the judgments and orders following that passed by the Punjab and Haryana High Court are, therefore, set aside. In the premises, Civil Appeals Nos. 1166 to 1172 of 1985 (Goodyear India Ltd. v. State of Haryana), Civil Appeals Nos. 1173 to 1177 of 1985 (Gedore (India) P. Ltd. v. State of Haryana), Civil Appeal No. 2674 of 1985 (Kelvinator of India Ltd. v. State of Haryana), Civil Appeal No. 1633 of 1985 (Food Corporation of India v. State of Haryana) and Civil Appeal No. 3033 of 1986 (Food Corporation of India v. State of Haryana) are allowed and the judgment and order of the High Court are set aside. 33.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Depending upon the answer to the question, the validity of the section can be judged. Mr. Dholakia submitted that the Act is, in pith and substance, an Act levying tax on purchase and not one levying tax on consignment, and referred to the observations of this court in State of Karnataka v. Ranganatha Reddy [1978] 1 SCR 641. According to him, the consignment contemplated in section 13AA is only of manufactured goods and no tax is levied under section 13AA in respect of such manufactured goods. He emphasised as aforesaid. It isd that, while determining the nature of a tax, though the standard or the measure on which the tax is levied may be a relevant consideration, it is not the conclusive consideration. One must have regard to such other matters as decided by the Privy Council inl in Council v. Province of Madras [1945] 1 STC 135, not by the name of tax but to its real nature, its pith and substance which must determine into what category it falls. See the observations in R. R. Engineering Co. v. Zila Parishad, Bareilly [1980] 3 SCR 1 , In re : A reference under the Govt. of Ireland Act, 1920 [1936] AC 352 (PC) at 358, and Navnit Lal C. Jhaveri v. K. K. Sen, AA C of I.T. [1965] 56 ITR 198 (SC) [1965] 1 SCR 909  at 915On an analysis, we find that the goods which are despatched are different products from the goods on the purchase of which purchase tax was paid. The Maharashtra legislation has to be viewed in the context of theh Amendment to the Constitution. Theh Amendment introduced article 269(1)(h) which lays down that the proceeds of the tax on consignment of goods (whether the consignment is to the person making it or to any other person) where such consignment takes place in the course ofe trade or commerce, will be assigned to the States. The said amendment also introduced entry No. 92B in List I of the Seventh Schedule. The said amendment was made on the consideration of the 61st Report of the Law Commission. Entry 92B in List I of the Seventh Schedule and article 269(1)(h) of the Constitution bring within its sweep the consignment of goods by a person either to himself or to any other person in the course ofe trade or commerce. Article 269(3) gives power to Parliament to formulate the principles for determining when a consignment of goods takes place in the course ofe trade or commerce. If entry92B of List Iis to be given the widest interpretation, as it should be, it would be clear that as a result of the constitutional changes introduced by theh a amendment in article 269 read with the entry, the tax on consignment of goods now comes within the exclusive legislative field of Parliament The true test to find out what is the pith and substance of the legislation is to ascertain the true intent of the Act which will determine the validity of the Act. If Parliament, in exercise of its plenary power under entry92B of ListI,imposes any tax on the despatch or consignment of goods, Parliament will be competent to do so. It is, therefore, not possible to accept the argument that the chargeable event was lying dormant and is activated only on the occurrence of the event of despatch. The argument on the construction of the enactment is misconceived. The charging event is the event the occurrence of which immediately attracts the charge. The taxable event cannot be postponed to the occurrence of the subsequent condition.In that event it would be the subsequent condition the occurrence of which would attract the charge which will be the taxable event. If that is so, then it is a duty on despatch. In that view of the matter, this charge cannot be sustainedAs mentioned hereinbefore, the section has been challenged as being violative of article 14 of the Constitution. This attack is based on the discrimination between the two types of taxes but, in the way we have construed the section, in our opinion, this question does not survive. It was further submitted by Dr. Pal that section 13AA of the Act is violative of article 301 of the Constitution. It makes a discrimination between the dealer/manufacturer who despatches the goods outside the State and other dealers/manufacturers. Both the dealers/manufacturers purchase the goods on payment of purchase tax and use them in the manufacture of taxable goods. The incidence of additional tax on the purchase of goods is attracted only when such manufactured goods are despatched outside the State. If a dealer/manufacturer has to despatch the goods outside the State, he has to pay a higher rate of tax and thus lie is discriminated against as compared to the other dealer/manufacturer who purchases the raw material on payment of 4 per cent. purchase tax, but despatches the raw material straightaway outside the State and uses them in the manufacture of goods outside the State. The High Court held that there was no violation of article 301 of the Constitution. Reference was made to the decision of this Court in Atiabari Tea Co. Ltd. v. State of Assam[1961] 1 SCR 809 , Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491 , Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 ; [1968] 1 SCR 705 , State of Madras v. Nataraja Mudaliar (N. K. ) [1968] 22 STC 376 ; [1968] 3 SCR 829 and State of Kerala v. A. B. Abdul Kadir [1970] 1 SCR 700 One has to determine : does the impugned provision amount to restriction directly and immediately on the trade or commerce movement ? As was observed by this court in Kalyani Stores V. State of Orissa [1966] 1 SCR 865 , imposition of a duty or tax in every case was not tantamount perse to any infringement of article 301 of the Constitution. Only such restrictions or impediments which directly or immediately impede free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301. A tax in certain cases may directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so. Every case must be judged on its own facts and its own setting of time and circumstances. Unless the court first comes to the finding or, the available material whether or not there is an infringement of the guarantee under article 301, the further question as to whether the statute is saved under article 304(b) does not arise. The goods taxed do not leave the State in the shape of raw material, which change their form in the State itself and there is no question of any direct, immediate or substantial hindrance to a freeflow of trade. On the evidence adduced, we are in agreement with the High Court that the challenge to the imposition in the background of article 301 cannot be sustained and, therefore, no question whether such imposition is saved under article 304(b) of the Constitution arisesIn the aforesaid view of the matter and for the reasons mentioned hereinbefore, it must be held that so far as the appeals in respect of the Haryana Act are concerned, the High Court was right in the view it took in Goodyear India Ltd.s case [1983] 53 STC 163 (P & H), as well as the views expressed by the High Court in Bata India Ltd. v. State of Haryana [1983] 54 STC 226 (P & H), are correct and are affirmed. The views of the High Court expressed in Des Raj Pushap Kumar Gulatis case [1985] 58 STC 393 (P & H) [FB] are incorrect for the reasons mentioned herein before. The last mentioned judgment and the judgments and orders following that passed by the Punjab and Haryana High Court are, therefore, set aside. In the premises, Civil Appeals Nos. 1166 to 1172 of 1985 (Goodyear India Ltd. v. State of Haryana), Civil Appeals Nos. 1173 to 1177 of 1985 (Gedore (India) P. Ltd. v. State of Haryana), Civil Appeal No. 2674 of 1985 (Kelvinator of India Ltd. v. State of Haryana), Civil Appeal No. 1633 of 1985 (Food Corporation of India v. State of Haryana) and Civil Appeal No. 3033 of 1986 (Food Corporation of India v. State of Haryana) are allowed and the judgment and order of the High Court are set aside