Case: Hiralal Rattanlal etc. etc Vs. State of U.P. and Anr. etc. etc

2. The facts of the case lie within a narrow compass. The appellants are dealers in foodgrains including cereals and pulses especially split or processed foodgrains and dal. The dispute in this case centres round the question whether the Government is competent to levy sales tax on the purchases made by the appellants of split or processed foodgrains and dal under the provisions of the United Provisions Sales Tax Act, 1948 as amended by the Uttar Pradesh Sales Tax Act (Amendment and Validation Act, 1970 (which will hereinafter be referred to as the Act)3. Under the Sales Tax Act as it originally stood (which will hereinafter be referred to as the principal Act), the purchases of split or processed foodgrains and dal by dealers were sought, to be brought to tax under Section 3-D of the principal Act read with the notification issued. The validity of the levy was challenged by Tilock Chand Prasan Kumar, the appellant in Civil Appeal No. 1625 of 1971 in respect of the assessment made on him for the assessment year 1966-67 by assessment order dated June 30, 1968 by means of a writ petition under Art. 226 of the Constitution. The High Court of Allahabad struck down the levy holding that the dal purchased by the petitioner before it could not be said to be a commodity essentially different from the arhar dal purchased by the dal mills and accordingly the purchases effected by the petitioner could not be regarded as the first purchases. This decision is reported in (1970) 25 STC 118 (All)  . Thereafter the Governor of U. P. issued an ordinance known as Uttar Pradesh Sales Tax (Amendment and Validation) Ordinance, 1970 (U. P. Ordinance No. 2 of 1970) adding inter alia Explanation II to Section 3-D as well as Section 7 to the principal Act. This Ordinance was later on enacted as an Act to which we have already made reference. The provisions of the Amending Act are identical with the provisions in the Ordinance. Though at the time of the institution of the writ petitions from which these appeals arise, the Ordinance had not yet been made into the Act, the Amending Act came into force during the pendency of the writ petitions. Hence we shall refer to the provisions of the Amending Act4. Under the principal Act a dealer is defined in Section 2 (c) as :" "dealer" means any person or association of persons carrying on the business of buying or selling goods in Uttar Pradesh whether for commission, remuneration or otherwise, and includes any firm or Hindu joint family and any society, club or association which sells goods to its members and also includes any department of the State Government or the Central Government which carries on such business and any undertaking engaged in the generation or distribution of electrical energy or any other form of power."(Explanation to the section is not relevant for our present purpose)5. Section 3 of the Act provides for the levy of multi-point tax. The portion of that section which is material for our present purpose reads :"Subject to the provisions of this Act, every dealer shall, for each assessment year, pay a tax at the rate of two naye paise per rupee on his turnover of such year, which shall be determined in such manner as may be prescribed.........."6. Section 3-A provides for a single point taxation in respect of sale of certain goods. At present we are only concerned with Section 3-D (1). It provides :"Except as provided in sub-section (2), there shall be levied and paid, for each assessment year or part thereof, a tax on the turnover, to be determined in such manner as may be prescribed, of first purchases made by a dealer or through a dealer, acting as a purchasing agent in respect of such goods or class of goods, and at such rates, not exceeding two paise per rupee in the case of foodgrains, including cereals and pulses, and five paise per rupee in the case of other goods and with effect from such date, as may, from time to time, be notified by the State Government in this behalf."(Explanation I to this section is not relevant for our purpose)7. The notification issued under Section 3-D of the principal Act on October 1, 1964 (Notification No. S.T. 7122/X) provided that with effect from October 1, 1964, the turnover of purchases in respect of goods mentioned therein shall be liable to tax under Section 3-D at the rate mentioned :"Foodgrains - 1.5 paise per rupee on first purchasesx x x x x"8. On the basis of Section 3-D read with the notification, as mentioned earlier, the authorities under the Act sought to bring to tax under the principal Act the first purchases of processed or split foodgrains including dal on the ground that they constituted a separate item of foodgrains quite independent of the unprocessed or unsplit foodgrains. This view, as seen above, was negatived by the High Court. After the decision of the High Court, the principal Act was amended. Under the Amending Act one more Explanation viz. Explanation II was added to Section 3-D"For the purposes of this sub-section, split or processed foodgrains, such as in the form of dal shall be deemed to be different from unsplit or unprocessed foodgrains, and accordingly, nothing in this sub-section shall be construed to prevent the imposition, levy or collection of the tax in respect of the first purchases of split or processed foodgrains merely because tax had been imposed, levied or collected earlier in respect of the first purchases of those foodgrains in their unsplit or unprocessed form."9. The Amending Act also added a validating provision to the principal Act viz. Section 7. That section reads:"Notwithstanding any judgment, decree or order of any Court or Tribunal to the contrary, every notification issued or purporting to have been issued under Section 3-A or Section 3-D of the principal Act before the commencement of this Act shall be deemed to have been issued under that section as amended by this Act and shall be so interpreted and be deemed to be and always to have been as valid as if the provisions of this Act were in force at all material times; and accordingly anything done or any action taken (including any order made, proceeding taken, jurisdiction exercised assessment made, or tax levied, collected or paid purporting to have been done or taken in pursuance of any such notification) shall be deemed to be, and always to have been, validly and lawfully done or taken."10. It will be necessarys later on to consider what was the vice that the legislature intended to cure by the Amending Act. The sequence of events itself discloses the purpose of the Ordinance as well as the Amending Act. That apart, the statement of objects and reasons which can be usefully looked into for the purpose of finding the vice that the legislature was trying to provide against reads thus :"Section 3-A and 3-D of the U. P. Sales Tax Act, 1948 provide for single point taxation. Under the former section the tax is levied on the turnover of sales, while under the latter the tax is levied on the turnover of first purchases. Plain and ornamentd glass bangles are subject to tax separately under Section 3-A. Similarly, unsplit and split pulses are separately subject to tax under Section 3-D. It has been held by the High Court in one case that tax cannot be levied separately on plain and ornamented glass bangles under Section 3-A and in another that tax cannot be levied separately on unsplit and split pulses under Section 3-D because in their opinion plain glass bangles are not a commodity different from ornamented glass bangles and similarly unsplit pulses and split pulses are also not two different commodities. These judgments have created legal difficulties in the assessment and collection of tax on the aforesaid commodities. Besides, the dealers have started applying for the refund of tax already collected on these commodities. This will have serious repercussions on the States revenue. Accordingly, it is proposed to amend Sections 3-A and 3-D to provide for the levy of tax on the aforesaid commodities as separate items. It is also proposed to validate the past levy, assessment and collection of tax on the above commodities......"(The remaining part of the statement of objects and reasons is not relevant for our present purpose)11. The appellants challenged the validity of Explanation II of Section 3-D as well as Section 7 introduced by the Amending Act before the High Court of Allahabad in petitions under Art. 226 of the Constitution. They further took the plea that the amendments incorporated were not effective enough to bring to tax the first purchases of split or processed foodgrains and pulses. The High Court rejected these contentions and dismissed the writ petitions. Thereafter these appeals have been brought after obtaining certificates from the High Court.

Court's reasoning:
21. It was next urged that on a true construction of Explanation II to Section 3-D, no charge can be said to have been created on the purchases of split or processed pulses. It was firstly contended that an Explanation cannot extend the scope of the main section; it can only explain that section. In construing a statutory provision, the first and the foremost rule of construction is the literary construction. All that we have to see at the very outset is what does that provision say ? If the provision is unambiguous and if from the provision, the legislative intent is clear, we need not call into aid the other rules of construction of statutes. The other rules of construction of statutes are called into aid only when the legislative intent is not clear. Ordinarily a proviso to a section is intended to take out a part of the main section for special treatment. It is not expected to enlarge the scope of the main section. But cases have arisen in which this Court has held that despite the fact that a provision is called proviso, it is really a separate provision and the so-called proviso has substantially altered the main section. In Commr. of Income-tax, Bombay City, Bombay v. Bipinchandra Maganlal and Co. Ltd., Bombay, (1961) 2 SCR 493   = (AIR 1961 SC 1040  ), this Court held that by the fiction in Section 10 (2) (vii) second proviso read with Section 2 (6C) of the Indian Income-tax Act, 1922 what is really not income is, for the purpose of computation of assessable income into taxable income22. In State of Rajasthan v. Leela Jain, (1965) 1 SCR 276   = (AIR 1965 SC 1296  ), this Court observed:"The primary purpose of the proviso now under consideration is, it is apparent, to provide a substitute or an alternative remedy to that which is prohibited by the main part of Section 4 (1). There is, therefore, no question of the proviso carving out any portion out of the area covered by the main part and leaving the other part unaffected. What we have stated earlier should suffice to establish that the proviso now before us is really not a proviso in the accepted sense but an independent legislative provision by which to a remedy which is prohibited by the main part of the section, an alternative is provided. It is further obvious to us that the proviso is not co-extensive with but covers a field wider than the main part of Section 4 (1)."23. In Bihta Co-operative Development and Cane Marketing Union Ltd. v. Bank of Bihar, (1967) 1 SCR 848   = (AIR 1967 SC 389  ), this Court was called upon to consider the Explanation to Section 48 (1) of the Bihar and Orissa Co-operative Societies Act, 1935. Therein this Court observed :"The question then arises whether the first Explanation to the section widens the scope of sub-section (1) of Section 48 so as to include claims by registered societies against non-members even if the same are not covered by clause (c)."24. On the basis of the language of the Explanation this Court held that it did not widen the scope of clause (c).But from what has been said in the case, it is clear that if on a true reading of an Explanation it appears that it has widened the scope of the main section, effect must be given to legislative intent notwithstanding the fact that the legislature named that provision as an Explanation. In all these matters the Courts have to find out the true intention of the legislature25. We are unable to accept the contention that Explanation II to Section 3-D did not widen the scope of Section 3-D. Section 3-D as it originally stood dealt with foodgrains and pulses. It did not treat the unprocessed or unsplit foodgrains and pulses as a separate item but because of Explanation II, we have now to read the expression "foodgrains" in Section 3-D as containing two separate items viz. (1) foodgrains unprocessed or unsplit and (2) foodgrains processed or split. It is true that Explanation II is not very happily worded but the intention of the legislature is clear and unambiguous. The newly added Explanation brings to tax with retrospective effect the split or processed foodgrains as well26. We next come to the contention that no levy of purchase tax can be made on split or unprocessed (processed ?) pulses without a fresh notification under Section 3-D read with Explanation II shwoing therein separately foodgrains unsplit or unprocessed as well as foodgrains split or processed. As seen earlier the notification issued merely refers to foodgrains. That notification does not classify foodgrains into two separate categories - processed or split and unprocessed or unsplit. Therefore we were told that no tax can be levied on processed or split foodgrains on the basis of that notification. This contention cannot be accepted as correct. The notification in question was issued under Section 3-D. Section 3-D refers to foodgrains but because of Explanation II to that section, we have now to read the expression "foodgrains" as containing two different items, processed or split foodgrains and unprocessed or unsplit foodgrains. Consequently while reading the expression "foodgrains" in the notification also, we must adopt the same approach. This conclusion is also obvious from Section 7.If the legislature had not retrospectively validated the assessments made on the first purchases of split or processed foodgrains, what did Section 7 seek to achieve ? That section says in plain words that notwithstanding any judgment, decree or order of any court or tribunal to the contrary, every notification issued or purporting to have been issued under Section 3-D of the principal Act, before the commencement of the Amending Act shall be deemed to have been issued under that section as amended by the Amending Act and shall be so interpreted and be deemed to be and always to have been as valid as if the provisions of the Amending Act were in force at all material times and accordingly, anything done or any action taken (including any order made, proceedings taken, jurisdiction exercised, assessment made, or tax levied, collected or paid, purporting to have been done or taken in pursuance of any such notification) shall be deemed to be, and always to have been validly and lawfully done or taken27. We asked the learned counsel appearing for the appellants to let us know the field in which Section 7 can be said to operate. Their answer was that though the legislature intended to validate the assessments made on the first purchases of the split or processed dal, it failed to achieve that object because of the defective phraseology employed in Explanation II to Section 3-D and Section 7 of the Amending Act. In other words their submission was that Section 7 has become otiose. It was urged on behalf of the appellants that a taxing provision will have to be strictly interpreted and in finding out the intention of the legislature in the matter of imposing tax, we cannot travel beyond the words of the section28. There is no doubt that a taxing provision has to be strictly interpreted. If a legislature intends to impose any tax, that intention must be made clear by the language employed in the statute; but that does not mean that the provision in a taxing statute should not be read reasonably. The contention that we should ignore Section 7 of the Amending Act is a contention difficult of acceptance. Dealing with a similar contention Venkatarama Ayyar, J. speaking for the Court in J. K. Jute Mills case, 12 STC 429   = (AIR 1961 SC 1534  ) (supra) observed at p. 435 :"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."29. We have earlier come to the conclusion that because Explanation II to Section 3-D the expression "foodgrains including pulses" in Section 3-D should be read as including two different items i.e. (1) unsplit or unprocessed foodgrains including pulses and (2) split or processed foodgrains including pulses. Consequently the expression "foodgrains" in the notification will also have to be read in the same manner. This, in our opinion, is the reasonable way of reading the notification in the light of Section 3-D, Explanation II to that section and Section 7 of the Act30. The only remaining contention is that the delegation made to the executive under Section 3-D is an excessive delegation. It is true that the legislature cannot delegate its legislative functions to any other body. But subject to that qualification, it is permissible for the legislature to delegate the power to select the person on whom the tax is to be levied or the goods or the transactions on which the tax is to be levied. In the Act, under Section 3 the legislature has sought to impose multi-point tax on all sales and purchases. After having done that it has given power to the executive, a high authority and which is presumed to command the majority support in the legislature, to select for special treatment dealings in certain class of goods. In the very nature of things, it is impossible for the legislature to enumerate goods, dealings in which sales tax or purchase tax should be imposed. It is also impossible for the legislature to select the goods which should be subjected to a single point sales or purchase tax. Before making such selections several aspects such as the impact of the levy on the society, economic consequences and the administrative convenience will have to be considered. These factors may change from time to time. Hence in the very nature of things, these details have got to be left to the executive31. In Banarsi Das Bhanot v. State of Madhya Pradesh, 1959 SCR 427   = (AIR 1958 SC 909  ) the question arose whether it was permissible for the legislature to empower the executive to amend the Schedule relating to exemptions. This Court by majority answered that question in the affirmative. If further held that it is not unconstitutional for the legislature to leave it to the executive to determine the details relating to the working of the taxation laws, such as the selection of the person on whom the tax is to be levied, the rates at which it is to be charged in respect of different classes of goods and the like.