Case: M/S. J. K. Jute Mills Co. Ltd Vs. The State Of Uttar Pradesh And Another

with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise. See Love v. Norman Wright (Builders) Ltd., 1944-1 KB 484. If that be the true view of sales tax then the Bihar Legislature acting within its own legislative field had the powers of a sovereign legislature and could make its law prospectively as well as retrospectively." (pp 1378-1379 (of SCR): (p. 463 of AIR) ).14. The decision of this court in Buchirajalingam v. State of Hyderabad, AIR 1958 SC 756 at pp. 759-60, is also to the same effect.15. The power of a legislature to enact a law with reference to a topic entrusted to it, is, as already stated, unqualified subject only to any limitation imposed by the Constitution. In the exercise of such a power, it will be competent for the legislature to enact a law, which is either prospective or retrospective. In Union of India v. Madan Gopal, 1954 SCR 541 : (AIR 1954 SC 158 ), it was held by this court that the power to impose tax on income under entry 82 of List I in Schedule VII to the Constitution, comprehended the power to impose income-tax with retrospective operation even for a period prior to the Constitution. The position will be the same as regards laws imposing tax on sale of goods, In M. P. V. Sundararamier and Co. v. State of Andhra Pradesh, 1958 SCR 1422: (AIR 1958 SC 468 ), this court had occasion to consider the validity of a law enacted by Parliament giving retrospectively operation to laws passed by the State legislatures imposing a tax on certain sales in the course of inter-State trade. One of the contentions raised against the validity of this legislation was that, having regard to the terms of Art. 286 (2), the retrospective legislation was not within the competence of Parliament. In rejecting this contention, the court observed:"Article 286 (2) merely provides that no law of a State shall impose tax on inter-State sales except in so far as Parliament may by law otherwise provide. It places no restrictions on the nature of the law to be passed by Parliament. On the other hand, the words in so far as clearly leave it to Parliament to decide on the form and nature of the law to be enacted by it. What is material to observe is that the power conferred on Parliament under Art.286(2) is a legislative power, and such a power conferred on a Sovereign Legislature carries with it authority to enact a law either prospectively or retrospectively, unless there can be found in the Constitution itself a limitation on that power." (p. 1460 (of SCR): (p. 486 of AIR)).And it was held that the law was within the competence of the legislature. We must, therefore, hold that the Validation Act is not ultra vires the powers of the legislature under entry 54, for the reason that it operates retrospectively.16. It was finally urged on the basis of Ss. 8-A, 14 and rule 23 of the U. P. Sales Tax Act that they contemplated only a prospective legislation and that those sections would be impossible of compliance under the present legislation. This is a consideration which is wholly foreign to the present question. The point which we have got to decide is whether the Validation Act is ultra vires. That has to be determined solely on the construction of entry 54 in List II in the seventh Schedule, and any other provisions of the Constitution bearing on the question. Even assuming that the provisions of the U. P. Sales Tax Act XV of 1948 contemplate a levy of tax in futuro that does not affect the power of the Legislature under Entry 54 to enact a law with retrospective operation. It can only result in those provisions being unenforceable as regards the levy under the impugned notification. Dealing with a similar contention in 1958 SCR 1422: (AIR 1958 SC 468 ), this court observed:"It is also contended that under the Sales Tax Acts, the levy of tax is annual and the rules contemplate submission of quarterly returns and payment of taxes every quarter on the admitted turnover, and that a conditional legislation under which payment of tax will become enforceable in futuro would be inconsistent with the scheme of the Act and the rules. But this argument, when examined, comes to no more than this that the existing rules do not provide a machinery for the levy and the collection of taxes which might become payable in future, when Parliament lifts the ban. Assuming that that is the true position, that does not affect the factum of the imposition, which is the only point with which we are now concerned. That the States will have to frame rules for realising the tax which becomes now payable is not a ground for holding that there is, in fact, no imposition of tax." (p. 1454 (of SCR): (p. 483 of AIR) ).17. None of the grounds urged by the petitioner in support of the contention that the Validation Act is ultra vires can be sustained. In the result we must hold that the Validation Act is intra vires, and the impugned notification dated March 31, 1956, stands validated by it.

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

Explanation:
0[ds]We are wholly unable to appreciate this contention. The object of the legislation as stated in the long title and in the preamble to the Act was to validate the impugned notification in relation to the amended section. Schedule B to the Act expressly mentions that notification. And if we are now to accede to the contention of the petitioner, we must hold that though the legislature set about avowedly to validate the notification dated March 31, 1956, it failed to achieve that object. A construction which will lead to such a result must, if that is possible, be avoided. The words, "in the form in which they were in force immediately before the commencement of this Act", no doubt occur after the word, "notifications". But then the words, "in the form" can have no reference to the impugned notification, because it had never changed form, whereas they were quite appropriate to S. 3A, because it had been amended. It should further be noted that the Validation Act was published both in Hindi and in English, and both of them were authorised versions. The words in the Hindi version make it clear beyond all doubt that the words, "in the form in which they were in force immediately before the commencement of this Act" qualify the word "sections" and not the word "notifications."That is the view expressed by a Bench of the Allahabad High Court in Haji Lal Mohammad Biri Works v. Sales Tax Officer AIR 1959 All 208, on a comparison of the two versions, and we are in agreement with it. There would have been no scope for this argument if transposing the words, the section read, "as if the said sections were, in the form in which they were in force immediately before the commencement of this Act, in force on the date on which the notifications were issued." But even in its present setting that is the meaning of the section, and the impugned notification must be held to be within the saving of the Validation Act.But it is urged on the strength of certain observations in 1942 FCR 90: (AIR 1942 FC 33), that a sales tax is a tax on the occasion of sale, and that therefore it could not be imposed with retrospective operation. This contention is, in our judgment, wholly withoutthe point for decision in that case was whether a tax imposed by a Provincial legislature on the sale of oil by a person who manufactured it was bad on the ground that it was in essence an excise duty. While a sales tax could be imposed by a Provincial legislature, an excise duty could be imposed only by the Federal legislature. In holding that the tax in question was a sales tax and not an excise duty, the court observed asduties of excise which the Constitution Act assigns exclusively to the Central Legislature are, according to the Central Provinces Case, In the matter of Central Provinces and Berar, Sales of Motor Spirit and Lubricant Taxation Act, 1938, 1939 FCR 18: (AIR 1939 FC 1), duties levied upon the manufacturer or producer in respect of the manufacture or production of the commodity taxed. The tax on the sale of goods, which the Act assigns exclusively to the Provincial Legislatures, is a tax levied on the occasion of the sale of the goods. Plainly a tax levied on the first sale must in the nature of things be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not qua manufacturer or producer." (p. 101 (of FCR): (p. 35 of AIR)).In the context, the words, "on the occasion of the sale" have reference to the character of the transaction and not to the point of time at which the duty becomes leviable, and they have no bearing on the question as to when such a tax could besee no force in this contention. It is no doubt true that a sales tax is, according to accepted notions, intended to be passed on to the buyer, and provisions authorising and regulating the collection of sales tax by the seller from the purchaser are a usual feature of sales tax legislation. But it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provisions for sellers to collect the tax from the purchasers. Whether a law should be enacted, imposing a sales tax, or validating the imposition of sales tax, when the seller is not in a position to pass it on the consumer, is a matter of policy and does not affect the competence of the legislature. This question is concluded by the decision of this court is Tata Iron and Steel Co., Ltd. v. State of Bihar, (1958) SCR 1355  : (AIR 1958 SC 452  ). The following observations of Das, C. J., bearing on this question might be quoted:"Under the 1947 Act the primary liability to pay the sales tax, so far as the State is concerned, is on the seller. Indeed before the amendment of the 1947 Act by the amending Act the sellers had no authority to collect the sales tax as such from the purchaser. The seller could undoubtedly have put up the price so as to include the sales tax which he would have to pay but he could not realise any sales tax as such from the purchaser. That circumstance could not prevent the sales tax imposed on the seller to be any the less sales tax on the sale of goods. The circumstances that the 1947 Act, after the amendment, permitted the seller who was a registered dealer to collect the sales tax as a tax from the purchaser does not do away with the primary liability of the seller to pay the sales tax. This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchaser and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller. The buyer is under no liability to pay sales tax in addition to the agreed sale price unless the contract specifically provides otherwise. See Love v. Norman Wright (Builders) Ltd., 1944-1 KB 484. If that be the true view of sales tax then the Bihar Legislature acting within its own legislative field had the powers of a sovereign legislature and could make its law prospectively as well as retrospectively." (pp 1378-1379 (of SCR): (p. 463 of AIR)must, therefore, hold that the Validation Act is not ultra vires the powers of the legislature under entry 54, for the reason that it operatesis a consideration which is wholly foreign to the present question. The point which we have got to decide is whether the Validation Act is ultra vires. That has to be determined solely on the construction of entry 54 in List II in the seventh Schedule, and any other provisions of the Constitution bearing on the question. Even assuming that the provisions of the U. P. Sales Tax Act XV of 1948 contemplate a levy of tax in futuro that does not affect the power of the Legislature under Entry 54 to enact a law with retrospective operation. It can only result in those provisions being unenforceable as regards the levy under the impugned notification. Dealing with a similar contention in 1958 SCR 1422: (AIR 1958 SC 468  ), this court observed:"It is also contended that under the Sales Tax Acts, the levy of tax is annual and the rules contemplate submission of quarterly returns and payment of taxes every quarter on the admitted turnover, and that a conditional legislation under which payment of tax will become enforceable in futuro would be inconsistent with the scheme of the Act and the rules. But this argument, when examined, comes to no more than this that the existing rules do not provide a machinery for the levy and the collection of taxes which might become payable in future, when Parliament lifts the ban. Assuming that that is the true position, that does not affect the factum of the imposition, which is the only point with which we are now concerned. That the States will have to frame rules for realising the tax which becomes now payable is not a ground for holding that there is, in fact, no imposition of tax." (p. 1454 (of SCR): (p. 483 of AIR) ).17. None of the grounds urged by the petitioner in support of the contention that the Validation Act is ultra vires can be sustained. In the result we must hold that the Validation Act is intra vires, and the impugned notification dated March 31, 1956, stands validated by it.