Case: M/s. Rattan Lal &amp; Company &amp; Another Vs. Assessing Authority Patiala &amp; Another

2. The petitioners are firms or companies dealing in cotton or oil seeds. Their business is to purchase ginned and unginned cotton for manufacturing yarn and selling the said cotton also to registered and unregistered dealers both inside and outside the State. The petitioners of the second category purchase oil-seeds for use in manufacture of edible oils. The surplus oil-seeds are sold to other dealers, registered or unregistered, inside and outside the State of Punjab. Both these commodities are essential commodities to which the Central Sales Tax Act applies. Certain provisions of these Amending Acts are challenged on the ground that they offend section 15 of the Central Act and are also unconstitutional being in violation of Articles 14 and 19.3. The Punjab General Sales Tax Act was passed in 1948. It was amended from time to time. The Act as it stood on April 1, 1960, was challenged in Bhawani Cotton Mills Ltd. v. State of Punjab, 1967-3 SCR 577   = (AIR 1967 SC 1616  ). On April 10, 1967 this Court by majority struck down certain portions of the Act on the ground that they were in conflict with the provisions of S. 15 of the Central Act. On November 1, 1966 the former State of Punjab bifurcated and the States of Punjab and Haryana came into existence. On December 29, 1967, the Punjab Legislature enacted Act 7 of 1967 amending the original Act, and the following day the Presidents Act intituled the Punjab General Sales Tax (Haryana Amendment and Validation) Act, 1967 (Act No. 14 of 1967)was passed for Haryana. Both the Acts were preceded by Ordinances which they replaced. It is not necessary to refer to the Ordinances.4. Section 15 ofthe Central Sales Tax Act, 1956 (54 of 1956) provided asRestrictions and conditions in regard to tax on sale or purchase of declared goods within a State.Every sales-tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in thatSection provides that in respect of declared goods the tax (sales or purchase) shall not exceed the prescribed limit and shall not be levied at more than one stage and shall be refunded to persons from whom it is collected if the goods are sold in course of inter-State trade or commerce. The original Punjab General Sales Tax Act, 1948 was challenged before this Court in Bhawani Cotton Mills Ltd. case,. The Act in defining the taxable turnover in section 5 (2) allowed certain deductions and one such deduction in cl. (vi)during that period on the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce, or in the course of export out of the territory of India:Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claimingoriginal section, as it stood on April 1, 1960, read asRate of Tax.(1) Subject to the provisions of this Act, there shall be levied on the taxable turnover every year of a dealer a tax at such rates not exceeding four naye paise in a rupee as the State Government may by notification direct:Provided .....Provided further that the rate of tax shall not exceed two naye paise in a rupee in respect of any declared goods as defined in clause (c) of section 2 ofthe Central Sales Tax Act, 1956, and such tax shall not be levied on the purchase or sale of such goods at more than one stage:Provided ..............(2) In this Act the expression "taxable turnover" means that part of a dealers gross turnover during any period which remains after deducting therefrom-"(a) his turnover during that period on-(i)........(ii) sales to a registered dealer of goods declared by him in a prescribed form.....x x x x x x(vi) the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer or in the course of inter-State trade or commerce, or in the course of export out of the territory of India:Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claiming deduction.x x xwas contended in that case that sections 2 (ff), 5 (1) second proviso and 5 (2) (a) (vi) were in conflict with section 15 of the Central Act. Bhawani Mills were dealers registered under the Punjab General Sales Tax Act, 1948 and for the assessment years 1960-61, 1961-62 and 1962-63 the Mills denied their liability to the Central Sales Tax on the purchase of cotton in the accounting years.The scheme of the Act then in force put the tax on purchase of cotton (which was a declared commodity) at the rate of 2 naiye paise in a rupee. By the second proviso to section 5 (1) it was further provided that such tax shall not be levied on the purchase of sale of such goods at more than one stage. The word dealer at that time was defined asmeans any person including a Department of Government who in the normal course of trade sells or purchases any goods that are actually delivered for the purpose of consumption in that State of Punjab, irrespective of the fact that the main place of business of such person is outside the said State and where the main place of business of any such person is not in the said State, dealer includes the local manager or agent of such person in Punjab in respect of such business."The provisions for taxing purchases of cotton were challenged on the ground that there was a possibility of the tax being levied at more than one stage, the provisions of the second proviso notwithstanding. The argument was summarized by our brother Vaidialingamthis case, according to the appellant, it has to send quarterly returns, even during the accounting year and, as per section 10 (4) of the Act, it has to pay also tax, in accordance with the returns submitted by it for every quarter. In the returns that are being sent, the dealer will have to include all purchases of cotton, effected by him during the quarter for which the return is sent. There is no indication, either in the Act or in the rules or the forms prescribed, as to whether the persons from whom the appellant purchased cotton, have paid tax or not. Section 15 of the Central Act is not restricted only to registered dealers. There will also be nothing to guide the appellant to know as to whether the goods, purchased by it, have been sold to it by its vendor within the period mentioned in cl. (vi) of section 5 (2) (a) of the Act. Under those circumstances, there is always a possibility or even a certainty, of more persons than one having paid tax or being made liable to pay tax in respect of the same goods at different stages. That is quite opposed to the provisions of section 15 (a) of the Central Act. Even otherwise, it is pointed out that if a person has purchased cotton and sells it after the period provided for in S. 5 (2) (a) (vi), that party is liable to pay sales tax and would have also paid the same. Another purchaser from the said party will also be liable to pay tax, on the same commodity if he sells the goods, after the period mentioned in cl. (vi).

Court's reasoning:
In our opinion, therefore, the present provisions of the Act are quite clear and are quite sufficient to make the amended Act accord with the Central Act. The arguments noted in the earlier case of this Court do not therefore arise.It will thus be seen that the present Act does not suffer from any of the defects from which the unamended Act had suffered.It is, however, contended that the Act has been made retrospective but no machinery is provided to discover if the declared goods were assessed to tax more than once. As we have already pointed out, the matter is within the ken of the dealer himself and it is for him to decide whether he would not claim the benefit of S. 11AA and ask for a refund or in future transactions delete the sales from his taxable turnover when he is not the last dealer liable to pay the tax.Therefore the retrospectively of the Act does not make any difference.It is not contended before us that it was not within the competence of the Punjab Legislature to pass such an Act retrospectively. The defect pointed out is the self-same defect which was noticed in Bhawami Mills case. But that defect no longeris to be noticed that the Central Act itself gives power to the Legislature to choose a rate of tax at not more than 3 per cent of the taxable turnover. The tax levied is well within that limit and therefore the Legislature has chosen the maximum and has left it free to the authorities to impose the tax within that maximum regard being had to the requirements of revenue and the expenditure necessary for theargument entirely misunderstands the position of the original Act after the reorganization. That Act applied now as an independent Act to each of the areas and is subject to the legislative competence of the Legislature in that area. The Act has been amended in the new States in relation to the area of that State and it is inconceivable that this could not be within the competence. If the argument were accepted, then the Act would remain unamendable unless the composite State came into existence once more. The scheme of the States Reorganization Act makes the laws applicable to the new areas until superseded, amended or altered by the appropriate Legislature in the new States. This is what the Legislature has done and there is nothing that can be said against suchany objection can be taken, it will be by those whose cases are pending and not by those whose cases have been closed. The option to submit to the assessment is open to every one alike and there is no discrimination if a party wants that his case need not be reconsidered. He has only to state that in writing and that would be the end of the matter.If he wants his case to be reconsidered, then he can go before the Tribunal and get his caserate of tax is same in every case. In State of Madras v. N. K. Nataraja Mudaliar, Civil Appeal No. 763 of 1967, D/- 18-4-1968 (reported in AIR 1969 SC 147), this Court stated that the essence of Arts. 301 and 303 is to enable the State by a law"to impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in the State are subject, so however, as not to discriminate between goods so imported and goods so manufactured or produced."It was pointed out by this Court that"imposition of differential rates of tax by the same State on goods manufactured or produced in the State and similar goods imported in the State is prohibited by that clause. But where the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced (sic) (in the State?). Article 304 has no application.Here also the tax is at the same rate and therefore the tax cannot be said to be higher in the case of imported goods. It may be that when the rate is applied the resulting tax is somewhat higher but that does not offend against the equality contemplated by Art. 304. That is the consequence of ad valorem tax being levied at a particular rate. So long as the rate is the same. Art. 304 is satisfied. Even in the case of local manufacturers, if their cost of production varies, the net tax collected will be more or less in some cases but that does not create any inequality because inequality is not the result of the tax but results from the cost of production of the goods or the cost of their importation. This ground, therefore, has also no substance. We do not think it necessary to set down here the provisions of the Haryana Amendment Act because they follow the scheme of the Punjab Amendment Act in substance and what we have said in regard to the Punjab Amending Act applies mutatis mutandis to Haryana Amendment Act also.