Case: Commissioner Of Sales Tax, U.P Vs. Bijli Cotton Mills, Hathras

1. Bijli Cotton Mills - respondent in this appeal - is a manufacturer of cotton yarn and is registered as a dealer under the U.P. Sales Tax Act (15 of 1948). Under the U.P. Sales Tax Act (15 of 1948) which came into force on April 1, 1948, sales-tax became payable on sales of a uniform rate of three pies in a rupee. By Act 25 of 1948 , S. 3-A was incorporated in Act 15 of 1948 conferring upon the Provincial Government power to declare by notification that the proceeds of sale of any goods or class of goods shall not be included in the turnover of any dealer except at such single point in the series of sales by successive dealers as the State Government may specify. By S.7 as amended by Act 25 of 1948, a dealer had the option to submit his return on the basis of the turnover of the sales in the previous year or on the basis of turnover of the sales in the current year. The respondent company opted to be assessed on the basis of the turnover of the previous year ending March 31, 1948.2. In exercise of the power under S. 3-A of the Act the Government of U.P. issued a notification declaring that with effect from June 9, 1948, the proceeds of goods entered in column 2 of the schedule to the said notification (which included cotton yarn) shall not be included in the turnover of any dealer except at the point in the series of sales by successive dealers, and that with effect from June 9, 1949, the rate of tax in respect of the turnover of the aforesaid goods shall be as set out in the schedule. As a result of the notification the sale of cotton yarn became taxable at a single point i.e., at a point of sale by the importer if the goods were imported from outside Uttar Pradesh and at a point of sale by the manufacturer, if manufactured in Uttar Pradesh, and the rate of tax in respect of cotton yarn was fixed, since the date of the notification, at six pies per rupee.3. The Sales -Tax Officer, Hathras in assessing the respondent company to sales-tax for the assessment year 1948-49 held that because of the notification issued by the Government, the rate of three pies per rupee in respect of sales of cotton yarn was to apply in the year of assessment for the first 69 days and for the remaining part of the year the rate of six pies per rupee was to apply, and on that account notwithstanding that the assessee had opted under S. 7 to be assessed on the basis of the turnover of the previous year, the rate of three pies was applicable to the assessable turnover for the first 69 days and for the rest of the year the rate applicable was six pies per rupee. This order was modified in appeal by the Judge (Appeals) Sales Tax, Meerut, who directed assessment of tax on the turnover at a uniform rate of three pies per rupee. But the order of the appellate court was reversed by the Judge (Revisions) Sales Tax, U.P. who restored the order of the Sales -tax Officer. The Judge (Revisions) Sales Tax at the instance of the respondent company then referred to the High Court of Judicature at Allahabad the following questionthe assessees who had elected the previous year are liable to pay tax in the assessment year 1948-49 according to the rates prevailing during the year ",High Court following its judgment in Modi Food Products Ltd. v. Commissioner of Sales Tax, U.P. , AIR 1956 All 35  answered the question as followssales of the assessee during the previous year which corresponded with the calendar year 1947 have to be taxed at the flat rate of 3 pies per rupee when making the assessment for the assessment yearspecial leave, the Commissioner of Sales Tax, U.P. has appealed to this Court against the order of the High Court.

Reasoning: In our view there is no substance in this contention. The question referred to the High Court posed a problem as to the liability of the respondent company to be assessed for the assessment year 1948-49. Two rival views were propounded before the Judge (Revisions) Sales Tax. One was that rates applicable to the fictional turnover for the year of assessment were those prevalent in the year 1948-49 and for the purpose of assessment they had to be applied to the turnover in the same proportion in which they would have applied if the option had not been exercised. That was the contention of the sales Tax Department. The contention of the assessee was that having opted, for the turnover of the previous year, the rates applicable to the turnover would be crystallised on the first day of the year of assessment and any modification since the commencement of the year in the rates would be inapplicable. This Court in the Modi Sugar Mills Ltd.s case, 1961-2 SCR 189  : (AIR 1961 SC 1047  ) accepted the contention raised by the assessee. But for the amendment, the question which was posed by the Judge (Revisions) Sales Tax would have to be answered as it was answered by the High Court. The Legislature has, however, amended the Act and has declared that notwithstanding the option exercised by the assesssee the tax would have to be computed in the light of the rates prevailing in 1948-49 as if they were projected upon the turnover of the previous year. The Legislature has expressly stated that this rule will prevail as if it was in force during the assessment year and all assessments will be made in the light of this amended rule. In answering the question which was submitted by the Judge (Revisions) Sales Tax, therefore, the law enacted by the Legislature is the law found incorporated in S. 31 by Amending Act III of 1963. This Court in giving its opinion on the question in the light of the amending Act is seeking to apply a legislative provision which was, by express enactment, in force at the time when the liability arose, for S. 31 enacted by Act III of 1963 is to be deemed to have been in operation at all material times in supersession of the previous rule declared by this Court. This Court is, therefore, not seeking to apply any law to the question posed before the High Court which was not in force on the date of the transaction which is the subject-matter of theobservation relied upon has to be read in the context of the finding of the High Court as to the character of the amending legislation. The observation therefore does not assist the contention that even in cases where the relevant statute has been amended with retroactive operation, so as to apply to the transaction which forms the subject-matter of the reference, the High Court or this Court is bound in recording its opinion on the question referred to ignore the amended law. If what counsel contends is true, the answer given by the High Court or by this Court would have no value whatever in cases where by retroactive amendment of the law, the old law has been superseded and is substituted by a new statutory provision. Undoubtedly the Tribunal called upon to decide a taxing dispute must apply the relevant law applicable to a particular transaction to which the problem relates, and what law normally is the law applicable as on the date on which the transaction in dispute has taken place. If the law which the tribunal seeks to apply to the dispute is amended, so as to make the law applicable to the transaction in dispute, it would be bound to decide the question in the light of the law so amended. Similarly when the question has been referred to the High Court and in the meanwhile the law has been amended with retrospective operation, it would be the duty of the High Court to apply the law so amended if it applies. By taking notice of the law which has been substituted for the original provision, the High Court is giving effect to legislative intent and does no more than what must be deemed to be necessarily implicit in the question referred by the Tribunal, provided the question is couched in terms of sufficient amplitude to cover an enquiry into the question in the light of the amended law, and the enquiry does not necessitate investigation of fresh facts. If the question is not so couched as to invite the High Court to decide the question in the light of the law as amended or if it necessitates investigation of facts which have not been investigated, the High Court may refuse to answer the question. Application of the relevant law to a problem raised by the reference before the High Court is not normally excluded merely because at the date when the Tribunal decided the question the relevant law was not or could not be brought to its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts that in deciding it the High Court is restricted to the application of the law which has been superseded by legislation since the date when the reference was made by the Tax Tribunal and is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the subject-matter of the reference.