Case: State Of Madhya Pradesh Vs. Abdeali

the order of the High Court quashing the assessment will be erroneous.We now proceed to consider these alternative submissions of learned counsel for the appellants. We do not think that the notification dated January 28, 1956, makes any such discrimination between footwear manufactured or produced in the State of Madhya Pradesh and footwear imported from other States as is prohibited by Article 304(a) of the Constitution.10. We have already pointed out that the exemption granted by the notification in question depends on the fulfilment of three conditions and all the three conditions are equally applicable to footwear manufactured or produced in the State and footwear imported from other States. It is obvious that the exemption is for the protection and benefit of small manufacturers who make hand-made shoes of small value and who may be unable to compete with large-scale manufacturers of footwear made on machines. Such a classification in the interests of small manufacturers has often been made and upheld by this Court. (See Orient Weaving Mills (P.) Ltd. v. The Union of India (Petition No. 110 of 1961 decided on February 28, 1962) and The British India Corporation Ltd. v. The Collector of Central Excise, Allahabad (Petition No. 94 of 1955 decided on August 20, 1962)).11. In the course of his arguments learned counsel for the respondent has first supported the interpretation put on the notification by the High Court. That question we have already dealt with earlier in this judgment. Learned counsel for the respondent has then submitted that the discrimination arises in the following way. He points out that a small manufacturer outside the State has to travel into the State and sell hand-made shoes there in order to get the benefit of the exemption, whereas a small manufacturer in the State has not to travel anywhere in order to get the benefit of the exemption. This, learned counsel has submitted, results in such discrimination as is forbidden by Article 304(a) of the Constitution. We do not agree. The argument of learned counsel for the respondent is really an argument of inconvenience. The exemption by itself creates no discrimination between footwear manufactured or produced in the State and imported from outside. Even a small manufacturer in the State must fulfil the conditions laid down by the notification in question before he can claim exemption from tax; in other words, he or a member of his family must also sell the hand-made shoes before he can claim the exemption. So must a small manufacturer outside the State if he wants to claim the benefit of the exemption. Unless he has travelled and brought the goods into another State, Article 304(a) does not apply; hence he cannot complain under that Article that he has to travel. It is worthy of note that the exemption relates to sales in the State and that is why a small manufacturer outside the State can claim no benefit of the exemption with regard to sales outside the State which are not taxable under the Act. It is necessary here to refer to one other point which has been urged by learned counsel for the respondent.12. Learned counsel has pointed out that the word "himself" used in the earlier notification of May 27, 1955, in connection with the word "manufacturer" has been omitted from the later notification of January 28, 1956, and he has contended that by reason of the omission of the word "himself" the benefit of the later notification may be available to a servant or an agent of the manufacturer. We do not think that this question falls for decision in the present appeal. The respondent in the present case is neither a servant nor an agent of the manufacturer. It is admitted that he is merely an importer and in his case nothing turns upon the omission of the word "himself" from the later notification.We also agree with the alternative submission of learned counsel for the appellants that if the notification dated January 28, 1956, is bad, then the respondent stands to gain nothing. If the exemption notification is struck down as invalid, that will not affect the validity of the notification of October 24, 1953, particularly of item 32 of Schedule 3 thereof. Learned counsel for the respondent has submitted that the two notifications must be read together and if the exemption goes, the notification of October 24, 1953, issued under section 5 of the Act must also go. We are unable to agree. The notification of October 24, 1953, fixes the point of sale at which the tax is to be imposed. The rate of tax is fixed by section 5 of the Act. There is no reason why the notification dated October 24, 1953, should fall with the notification dated January 28, 1956, which was issued under section 4(3) of the Act. The principle laid down by this Court in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax ([1955] 2 S.C.R. 483; 6 S.T.C. 627), that where an assessment consists of a single undivided sum in respect of the totality of the property treated as assessable, the wrongful inclusion in it of certain items of property which by virtue of a provision of law were expressly exempted from taxation, renders the assessment invalid in toto, will not apply in the present case for the simple reason that there is no wrongful inclusion of any item in the assessment order. If the exemption goes, then the respondent has been rightly assessed on his total turnover. It is only when the respondent is entitled to the exemption claimed that he can say that the assessment is bad and must be quashed. The respondent can claim the exemption only if the interpretation put by the High Court on the notification dated January 28, 1956, is accepted as correct. If that interpretation is not correct, then this appeal must be allowed even if the notification is bad by reason of the provisions of Article 304(a) of the Constitution.

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

Explanation:
1[ds]We think that this contention is right and must be accepted. The notification clearly lays down three conditions for the grant of exemption : one of the conditions is that the sale must be of such shoes, chappals, country shoes and footwear as are hand-made and not manufactured on power machine; the second condition is that the sale price must not exceed Rs. 12-8-0; and the third condition is that the sale must be by the manufacturer or any member of his family. The notification when it uses the expression "in case of sale" must refer to the sale which is being exempted from tax in the State; in other words, it has reference to the taxable event in the State as per Schedule 3 of the notification dated October 24, 1953. That notification makes it clear that the tax is a single point tax, and the taxable event is the sale by the importer or manufacturer in the State. Therefore, the expression "in case of sale" in the exemption notification can have no reference to a sale outside the State. The High Court was in error when it said that it made no difference whether the sale was by the manufacturer within the State directly to the purchaser or whether the sale was by the manufacturer outside the State to the importer who then sold the shoes to the purchaser in the State. When a manufacturer sells shoes outside the State to an importer and the importer again sells shoes in the State, there are really two sales, one outside the State and one inside it. The sales outside the State are not taxable under the Act and the notification of January 28, 1956, has no reference to such sales. When the notification uses the expression "in case of sale by the manufacturer or a member of his family", it has reference to such sales as would come but for the exemption within item 32 of Schedule 3 of the notification dated October 24, 1953. If the interpretation put by the High Court is correct, then the practical effect will be to obliterate one of the conditions laid down in the notification, namely, that the sale, which is the taxable event, must be by the manufacturer or any member of his family. We do not think that the notification is capable of such an interpretation. All the three conditions laid down in the notification must be fulfilled before the exemption referred to therein can be claimed and we cannot, by interpretation, delete one of the conditions.On the question whether the notification contravenes Article 304(a) of the Constitution learned counsel for the appellants has canvassed before us the larger question that Article 304(a) has no reference to sales taxnow proceed to consider these alternative submissions of learned counsel for the appellants. We do not think that the notification dated January 28, 1956, makes any such discrimination between footwear manufactured or produced in the State of Madhya Pradesh and footwear imported from other States as is prohibited by Article 304(a) of the Constitution.We have already pointed out that the exemption granted by the notification in question depends on the fulfilment of three conditions and all the three conditions are equally applicable to footwear manufactured or produced in the State and footwear imported from other States. It is obvious that the exemption is for the protection and benefit of small manufacturers who make hand-made shoes of small value and who may be unable to compete with large-scale manufacturers of footwear made ondo not agree. The argument of learned counsel for the respondent is really an argument of inconvenience. The exemption by itself creates no discrimination between footwear manufactured or produced in the State and imported from outside. Even a small manufacturer in the State must fulfil the conditions laid down by the notification in question before he can claim exemption from tax; in other words, he or a member of his family must also sell the hand-made shoes before he can claim the exemption. So must a small manufacturer outside the State if he wants to claim the benefit of the exemption. Unless he has travelled and brought the goods into another State, Article 304(a) does not apply; hence he cannot complain under that Article that he has to travel. It is worthy of note that the exemption relates to sales in the State and that is why a small manufacturer outside the State can claim no benefit of the exemption with regard to sales outside the State which are not taxable under thedo not think that this question falls for decision in the present appeal. The respondent in the present case is neither a servant nor an agent of the manufacturer. It is admitted that he is merely an importer and in his case nothing turns upon the omission of the word "himself" from the later notification.We also agree with the alternative submission of learned counsel for the appellants that if the notification dated January 28, 1956, is bad, then the respondent stands to gain nothing. If the exemption notification is struck down as invalid, that will not affect the validity of the notification of October 24, 1953, particularly of item 32 of Schedule 3 thereof. Learned counsel for the respondent has submitted that the two notifications must be read together and if the exemption goes, the notification of October 24, 1953, issued under section 5 of the Act must also go. We are unable to agree. The notification of October 24, 1953, fixes the point of sale at which the tax is to be imposed. The rate of tax is fixed by section 5 of the Act. There is no reason why the notification dated October 24, 1953, should fall with the notification dated January 28, 1956, which was issued under section 4(3) of the Act. The principle laid down by this Court in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax ([1955] 2 S.C.R. 483; 6 S.T.C. 627), that where an assessment consists of a single undivided sum in respect of the totality of the property treated as assessable, the wrongful inclusion in it of certain items of property which by virtue of a provision of law were expressly exempted from taxation, renders the assessment invalid in toto, will not apply in the present case for the simple reason that there is no wrongful inclusion of any item in the assessment order. If the exemption goes, then the respondent has been rightly assessed on his total turnover. It is only when the respondent is entitled to the exemption claimed that he can say that the assessment is bad and must be quashed. The respondent can claim the exemption only if the interpretation put by the High Court on the notification dated January 28, 1956, is accepted as correct. If that interpretation is not correct, then this appeal must be allowed even if the notification is bad by reason of the provisions of Article 304(a) of the Constitution.