1. Dispute over whether a sales tax exemption notification for manufactured tobacco applies retrospectively from the start of the financial year or from the date of issuance. (Para 1 , 2 , 3 )
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1961 Supreme(SC) 390
SUPREME COURT OF INDIA
5th December, 1961.
B.P. SINHA, C.J.I., J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH AND J.R. MUDHOLKAR, JJ.
M/s. Mathra Parshad and Sons, Appellants,
Versus
State of Punjab and others, Respondents.
Civil Appeal No. 9 of 1961.
Advocates appeared
Mr. M. C. Setalvad, Attorney General for India (M/s. S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain & Co., with him), for Appellants; Mr. S. M. Sikri, Advocate General for the State of Punjab (M/s. B. K. Khanna and P. D. Menon, Advocates, with him), for Respondents.
Advocates:
B.K.Khanna, M.C.SETALVAD, P.D.MENON, P.L.VOHRA, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.M.Sikri, S.N.ANDLEY
B.K.Khanna, M.C.SETALVAD, P.D.MENON, P.L.VOHRA, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.M.Sikri, S.N.ANDLEY
An exemption notification issued during a financial year for a tax levied on the annual taxable turnover operates from the beginning of that financial year, unless the notification specifies a different commencement date.
Headnote:(A) Sales Tax Act - Sections 4, 5, 6, 10 - Tobacco Vend Fees Act - Exemption Notification - Date of operation of exemption - Taxable turnover - Yearly tax vs. Periodical collection - Where a tax is levied on the taxable turnover every year, an exemption granted during the year, without a specified commencement date in the notification, operates for the whole financial year. The divisions of the year into different parts for the purpose of filing returns are merely machinery for the collection of tax and do not change the yearly nature of the tax. (Paras 12, 13)
(B) Statutory Repeal - No repeal of an earlier Act by a later Act can be implied unless there is an express repeal or the two Acts are so incompatible that they cannot stand together. (Para 4)
(C) Estoppel - There can be no estoppel against a statute. If the law requires a certain tax to be collected, any assurance by the government that it would not be collected does not bind the state when it chooses to collect it. (Para 4)
Facts of the case:
A firm of merchants selling manufactured tobacco paid sales tax for the first quarter of the financial year. Subsequently, the state government issued a notification exempting manufactured tobacco from sales tax. Prior to this, contradictory press notes were issued regarding whether sales tax would be charged alongside license fees under a separate vend fees act. The state later sought to recover sales tax for the period from the start of the financial year up to the date of the exemption notification. The appellants contended that the exemption should operate from the beginning of the financial year.
Findings of Court:
The court held that the tax is a yearly tax as it is levied on the taxable turnover every year. The method of collection via monthly, quarterly, or annual returns is a procedural mechanism. If the exemption operated only from the date of the notification, dealers with different return intervals would be treated unequally. Since the notification did not specify a commencement date, the exemption must operate for the entire year.
Issues: The primary issue was whether the exemption granted by the notification issued on September 27, 1954, had effect from that date or from the beginning of the financial year.
Ratio Decidendi: The nature of the tax as a yearly levy on taxable turnover is decisive. In the absence of a specific commencement date in the notification or a provision in the Act to the contrary, an exemption granted during the year applies to the sales of those goods throughout that financial year.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether the Tobacco Vend Fees Act repealed the Sales Tax Act, if government assurances created estoppel, and if the exemption applies for the entire financial year. (Para 4 , 9 , 10 )
3. The tax is yearly, and periodic returns are merely collection machinery; thus, an unspecified exemption date applies to the whole year to avoid disparate treatment. (Para 12 , 13 )
4. Where a tax is levied on the taxable turnover every year, an exemption granted during that year applies retrospectively to the whole year unless specified otherwise. (Para 13 )
6. Can a government assurance in a press note estop the state from collecting a tax required by statute?
No. There can be no estoppel against a statute. If the law requires a tax to be collected, any assurance that it would not be collected does not bind the government whenever it chooses to collect it. (Para 4 )
7. Does the introduction of a new tax on a commodity imply the repeal of an existing sales tax on the same commodity?
No. Two taxes can be levied on the same commodity without one law repealing the other. Repeal must be express or the two Acts must be irreconcilable. (Para 4 )
8. When does a tax exemption notification apply if the tax is yearly and the notification does not specify a commencement date?
If the tax is levied on the taxable turnover every year, an exemption granted during that year operates for the whole year unless the Act or Notification specifies a different commencement date. (Para 12 , 13 )
Judgment
HIDAYATULLAH, J. : (Majority judgment: B. P. Sinha, C.J.I., Hidayatullah, Shah and Mudholkar, JJ.) The appellants are a firm of general merchants, which sells, among other goods, manufactured tobacco as defined in the Punjab Tobacco Vend Fees Act, 1954 (12 of 1954), which came into force in the State of Punjab from April 1, 1954. The firm is also a registered dealer under S. 7 of the EAST PUNJAB GENERAL SALES TAX ACT , 1948, and till the end of March, 1954, was paying sales tax on manufactured tobacco also. Indeed, the firm paid sales-tax on manufactured tobacco, also for the next quarter ending on June 30, 1954, but did not pay in the succeeding quarter in view of certain events, to which a detailed reference will be made presently. On September 27, 1954, the State Government issued a Notification (No. 4556-E & T (Ch) -54/957) by which the schedule of exemptions under S. 6 of the Sales Tax Act, was amended by the inclusion of item 51, which reads as follows:
Item 51 "Manufactured tobacco as defined in the Punjab Tobacco Vend Fees Act, 1954."
This Notification was preceded by a Notification of May, 7, 1954 (No. 427-E &T (Ch)54/369), by which the State Government had given notice, as required by law, of its intention to add the said item in the schedule of exemptions. In June, 1954, the State Government issued a Press Note by which it was intended to convey to the dealers that though the Tobacco Vend Fees Act had come into force from April 1, 1954, it was not intended to levy both the sales tax as well as the fee for any period. The Press Note reads as follows :
"There is some misapprehension in the minds of dealers in manufactured tobacco as to whether sales tax is also chargeable in respect of manufactured tobacco after the 1st April, 1954, in addition to the license fees under the Tobacco Vend Fees Act. Government would like to make it clear that although the Tobacco Vend Fees Act has come into force with effect from 1st April, 1954, no license fees for dealers have yet been prescribed under the Act. Therefore, the levy of sales tax continues till the Vend Fee licences come into operation. It is to be clearly understood that the Vend Fee will be proportionately reduced for the current financial year to adjust the period for which sales tax will have been charged. Manufactured tobacco will be exempted from sales tax simultaneously with the enforcement of the Vend Fees."
2. On August 2, 1954, the State Government issued another Press Note, in which the decision was altered. The Press Note said :
"Government recently announced through a press note that the levy of Sales Tax on manufactured tobacco would be continued till the Vend Fee Licences came into operation and that the Vend Fee would be proportionately reduced for the current financial year in respect of the period for which Sales Tax would have been charged. In order to avoid double taxation, Government have since reconsidered the matter and have, in supersession of the previous decision, decided that the Sales Tax, if any, recovered from the dealers would be refunded and that no Sales Tax would be charged during the current financial year in respect of sales of tobacco which fall under the Tobacco Vend Fees Act. Tobacco Vend Fees will be recovered at full rates for the whole year as and when rules under the Punjab Tobacco Vend Fees Act are finalised."
It appears that the Rules under the Tobacco Vend Fees Act were not promulgated; nor were the forms and licences prescribed during the financial year ending on March 31, 1955. In the meantime, the appellants, as already stated, paid sales tax on sale of manufactured tobacco for the first quarter ending June 30, 1954, and the Notification exempting manufactured tobacco from sales tax was issued on September 27,1954. The appellants had made enquiries from the Excise and Taxation Commissioner, Purjab, about the Press Note of August 2, 1954, and had been assured that the Notification as printed in the Newspapers was accurate
