Case: International Cotton Corporation Private Limited &amp; Another Vs. Commercial Tax Officer, Hubli &amp; Others

3. The first contention regarding the unconstitutionality of S. 8 (2) (a) is sought to be based on the decision of this Court in G. Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Asst. Commr. 33 SIC 219 - (AIR 1974 SC 1660  = 1974 Tax LR 2017) dealing with the constitutionality of, section 8 (2) (b). We consider that far from supporting the appellants that decision actually is against the contention put forward on behalf of the appellants. It is only necessary to set out what this Court said in that decision. It is hardly necessary to add anything more. In that case the majority while upholding the validity of Section 8 (2) (b) observedhas been argued on behalf of the appellants that the fixation of rate of tax is a legislative function and as the Parliament has, under Section 8 (2) (b) of the Act, not fixed the rate of Central sales tax but has adopted the rate applicable to the sale or purchase of goods inside the appropriate State in case such rate exceeds 10 per cent the Parliament has abdicated its legislative function. The above provision is consequently stated to be constitutionally invalid because of excessive delegation of legislative power. This contention, in our opinion, is not well founded. Section 8 (2) (b) of the Act has plainly been enacted with a view to prevent evasion of the payment of the Central sales tax. The Act prescribes a low rate of tax of 3 per cent in the case of inter-State sales only if the goods are sold to the Government or to a registered dealer other than the Government. In the case of such a registered dealer, it is essential that the goods should be of the description mentioned in sub-section (3) of Sec. 8 of the Act. In order, however, to avail of the benefit of such a low rate of tax under Section 8 (1) of the Act, it is also essential that the dealer selling the goods should furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer, to whom the goods are sold, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, or if the goods are sold to the Government not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government. In cases not falling under sub-section (1), the tax payable by any dealer in respect of inter-State sale of declared goods is the rate applicable to the sale or purchase of such goods inside the appropriate State: vide Section 8 (2) (a) of the Act. As regards goods other than the declared goods, Section 8 (2) (b) provides that the tax payable by any dealer on the sale of such goods in the course of inter-State trade or commerce shall be calculated at the rate of 10 per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher.

Reasoning: 4. It is next contended that as Section 8 (2) (a) states that the tax payable shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State, it is the rate that was prevalent when S. 8 (2) (a) was enacted that would be applicable and not any subsequent variations in this rate of tax. If this argument is accepted no question of unconstitutional delegation of the Parliaments legislative powers in favour of the State Legislatures would arise at all. It would be remembered that the ground for attacking the constitutionality of ,Section 8 (2) (a) is that Parliament if it is deemed to have permitted the application of rate of sales tax enacted by a State Legislature in respect of intra-State sales to inter-State sales also that would be impermissible delegation by Parliament of its legislative powers. We have already dealt with that question. All that is necessary now to add is that the rate applicable merely mean the rate applicable at the relevant point of time and not the rate applicable when Section 8 (2) (a) was enacted. The whole scheme of the Central Sales Tax Act is to adopt the machinery of the law relating to Sales Tax Acts of the various States, in cases where those states happen to be the appropriate States as also the rates prescribed by those Acts. Under Section 9 of the Act the tax payable by any dealer under the Central Sales Tax Act is to be levied and collected by the Government of India in accordance with the provisions of sub-section (2) of that section. Under sub-section (2) subject to the provisions of that 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 payable 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 Hindu 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." Though the tax is levied and collected by the Government of India it is intended for the benefit of and is paid to the State whose officers assess and collect the tax. The adoption of the machinery of and the rate of tax prevalent in the ,State is for the convenience of assessment as well as for the convenience of the parties so that they will not have to deal with two sets of officers and two sets of laws in addition to avoiding discrimination between intra-State and inter-State sales. The very purpose of the Act and its scheme would be defeated or at least considerably impeded if the rates of tax applicable in any State in respect of intra-State sales were not applicable to inter-State sales where that State is the appropriate State. We are satisfied that the rate applicable is the rate applicable at the relevant Point of time. Only that interpretation is consistent with the legislative policy that inter-State trade should not be discriminatedargument is that while transactions between the 10th day of November, 1964, that is the date of judgment of this Court in Yaddalams case, 16 STC 231   = (AIR 1965 SC 1510  ) and the 9th day of June, 1969, that is the date on which the Central Sales Tax (Amendment) Ordinance, 1969, which preceded and was subsequently replaced by the Central Sales Tax (Amendment) Act, 1969, was promulgated, were exempted from the liability to pay tax, if in fact the tax in respect of these transactions had not been collected by the dealer, a similar concession had not been granted to dealers who were similarly situated, that is, who had not collected any tax on their sales prior to 10-11-1964 and that such concession should be available at least in the case of assessees who had not made any collection after the judgment of the Mysore High Court in Yaddalams case, that is, 23rd January, 1962 (reported in 1962-40 Mys LJ 577). There are two answers to this submission. Firstly, the fact that transactions of sale prior to the period before 10th November 1964 or at least the period between 23-1-1962 and 10-11-1964 were not given the same concession as the transactions between 10-11-1964 and 9-6-l969 does not mean that the latter concession is unconstitutional. A concession is not a matter of right. Where the Legislature taking into consideration the hardships caused to a certain set of tax-payers gives them a certain concession it does not mean that that action is bad as another set of taxpayers similarly situated may not have been given a similar concession. It would not be proper to strike down the provision of law giving concession to the former on the ground that the latter are not given such concession. Nor is it possible for this Court to direct that the latter set should be given a similar concession. That would mean legislation by this Court and this Court has no legislative powers.We are not able to appreciate the suggestion on behalf of the appellants that Section 6 (1A) read with Section 10 of the Amendment Act should be declared unconstitutional in so far as it relates to the period between 23-1-1962 and 10-11-l964 or how that is permissible. That means that the tax leviable under Section 6 (1A) cannot be levied during that period. That means even those who have collected the tax would escape. Secondly, in respect of that period also the dealers concerned might very often be the same set of persons and there can therefore be no question ofuntenability of this argument would be apparent from the fact that this means that all sales and purchases are generally exempt from tax. This argument proceeds on the basis that the sale and purchase are different transactions. The Legislature might for the sake of convenience or from other considerations of policy make either a sale or a purchase taxable in respect of the sale of any particular goods. That does not mean that the sale and purchase in respect of the same transaction are two different transactions. They are two facets of the same transaction. Therefore when sub-section (2A) of Section 8 uses the words "the sale or, as the case may be, the purchase" it is merely referring to the fact that State Sales Tax Acts make either the sale or purchase taxable and not that where the sale is taxable the purchase is exempt from tax and where the purchase is taxable the sale is exempt from tax and therefore where one of them is exempt from tax in respect of an intra-State sale the inter-State sale is completely exempt from tax. We agree with the view of the Mysore High Court that the object of sub-section (2A) of section 8 is to exempt transaction of sale of any goods if they are wholly exempt from the tax under the sales tax law of the appropriate State and make the said sale chargeable at lower rates where under the Sales Tax Act of the State the sale transactions are chargeable to tax at a lower rate and it is not correct to say that where goods are taxable at the point of purchase or sale the transaction is exempt from tax generally. A sales tax has necessarily to be levied on a sale or purchase and this argument implies that all sales are exempt from tax. The plain meaning of the said subsection is that if under the sales tax law of the appropriate State no tax is levied either at the point of sale or at the point of purchase at any stage the tax under the Act shall be nil. Reading S. 6 (1-A) and Sec. 8 (2-A) together along with the Explanation the conclusion deducible would be this: where the intra-State sales of certain goods are liable to tax, even though only at one point, whether of purchase or of sale, a subsequent inter-State sale of the same commodity is liable to tax, but where that commodity is not liable to tax at all if it were an intra-State sale the inter-State sale of that commodity is also exempt from tax. Where an intra-State sale of a particular commodity is taxable at a lower rate than 3 per cent then the tax on the inter-State sale of that commodity will be at that lower rate. A sale or purchase of any goods shall not be exempt from tax in respect of inter-State sales of those commodities if as an intra-State sale the purchase or sale of those commodities is exempt only in specific circumstances or under specified conditions or is leviable on the sale or purchase at specified stages. On this interpretation Section 6 (1A) as well as Section 8 (2A) can stand together.The other attack that the rectification order is beyond the point of time provided in Rule 38 of the Mysore Sales Tax Rules is also without substance. What was sought to be rectified was the assessment order rectified as a consequence of this Courts decision in Yaddalams case, 16 STC 231   = (AIR 1965 SC 1510  ). After such rectification the original assessment order was no longer in force and that was not the order sought to be rectified. It is admitted that all the rectification orders would be within time calculated from the original rectification order. Rule 38 itself speaks of "any order" and there is no doubt that the rectified order is also "any order" which can be rectified under Rule 38.