1. Sales tax exemption for edible oils produced in mechanical ghanis — validity of notification restricting exemption — requirement of Presidential assent under Article 286(3) of the Constitution. (Para 1 , 2 , 3 )
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1967 Supreme(SC) 230
SUPREME COURT OF INDIA
K.N. WANCHOO, C.J.I., R.S. BACHAWAT, V. RAMASWAMI, G.K. MITTER AND K.S. HEGDE, JJ.
The State of Punjab (In all the Appeals), Appellant
Versus
M/s. Sansari Mal Puran Chand (In all the Appeals), Respondent.
Civil Appeals Nos. 1182 to 1184 of 1965,
D/- 22-8-1967.
Advocates Appeared
Mr. R. Ganapathy Iyer, Advocate, and Mr. R. N. Sachthey, Advocate for Mr. R. H. Dhebar, Advocate, for Appellant (In all the Appeals); M/s. R. K. Garg and S. C. Agarwal, Advocates of M/s. Ramamurthi and Co., and M/s. Shiv Pujan Singh and Anil Kumar, Advocates, for Respondent (In all the Appeals).
Advocates:
Anil Kumar, R.Ganapathy Iyer, R.H.Dhebar, R.K.GARG, R.N.SACH, S.C.AGRAWAL, SHIV PUJAN SINGH
Anil Kumar, R.Ganapathy Iyer, R.H.Dhebar, R.K.GARG, R.N.SACH, S.C.AGRAWAL, SHIV PUJAN SINGH
A law authorising tax rates on essential goods requires Presidential assent under Article 286(3) of the Constitution. However, notifications issued under pre-Constitution Acts are not "laws made by the legislature" and do not require such assent to be valid.
Headnote:(A) General Sales-tax Act, 1948 - Sections 4, 5 and 6 - Act No. 19 of 1952 - Constitution of India - Article 286(3) - Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952 - Section 3 - Tax on edible oils - Validity of notification and requirement of Presidential assent - A law authorising the fixation of tax rates on goods declared essential for the life of the community is a law authorising the imposition of a tax and requires Presidential assent under Article 286(3) to take effect (Paras 9, 10 and 11) - A notification issued under the authority of a pre-Constitution Act is not a "law made by the legislature of a State" and therefore does not require Presidential assent to affect essential goods (Para 14).
(B) Excessive Delegation - If a section providing for the rate of tax is void due to excessive delegation, other sections of the Act remain valid, though the tax may be unenforceable until a valid rate-fixing provision is inserted (Paras 6 and 18).
(C) Constitutional Amendment - The removal of a constitutional restriction on a law passed by a competent legislature enables that law to become fully effective from the date of the amendment (Paras 12 and 13).
Facts of the case:
Dealers claimed tax exemption for edible oils produced in ghanis run by mechanical process. A notification substituted the schedule of tax-free goods, thereby removing the exemption for such oils. The validity of the notification and the underlying tax law was challenged on the ground that they required the assent of the President of India as the goods had been declared essential for the life of the community by Parliament.
Findings of Court:
The amended section authorising the fixation of tax rates was a law authorising the imposition of tax and could not take effect for essential goods without Presidential assent. However, the notification issued under a pre-Constitution provision was valid and did not require such assent. Tax was effectively imposed only after the constitutional restriction was lifted by a constitutional amendment.
Issues: Whether the notification removing tax exemption for edible oils produced in mechanical ghanis was valid and whether the amended tax law required Presidential assent to be effective.
Ratio Decidendi: A law fixing or authorising the rate of tax is a law "authorising the imposition of a tax" under Article 286(3). Notifications issued under pre-Constitution Acts are not "laws made by the legislature" and thus do not require Presidential assent. A law that is restricted by a constitutional provision, but passed by a competent legislature, becomes effective once that restriction is removed.
Result: Respondents are not liable to pay tax on sales of edible oil produced in ghanis run by mechanical power effected before September 11, 1956, but they are liable to pay tax on such sales made after September 11, 1956.
Legal Category Hierarchy
Table of Contents
2. Whether a notification restricting tax exemption on essential goods constitutes a law made by the State Legislature requiring Presidential assent under Article 286(3) of the Constitution. (Para 1 , 4 )
3. Analysis of excessive delegation in Section 5, the nature of laws authorising tax imposition, and the distinction between legislative laws and notifications under pre-Constitution Acts. (Para 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 )
4. Notifications issued under pre-Constitution Acts are not laws made by the State Legislature and do not require Presidential assent under Article 286(3) for essential goods. (Para 14 )
5. Tax liability on sales of edible oil produced in mechanical ghanis effective from September 11, 1956, following the removal of constitutional restrictions. (Para 16 , 18 , 19 )
6. Does a provision allowing the government to fix tax rates by notification without a ceiling constitute excessive delegation?
Yes, the court held that Section 5 of the East Punjab Act No. 46 of 1948, as originally passed, was void on the ground of excessive delegation of legislative power to the State Government. (Para 6 )
7. Does a law that fixes the maximum rate of tax but allows the government to determine the actual rate constitute a law authorising the imposition of tax?
Yes, the court held that the amended Section 5, which authorised the fixation of the rate of tax leviable on the taxable turnover, was a law authorising the imposition of a tax. (Para 9 , 10 )
8. Do notifications issued under a pre-Constitution Act require Presidential assent if they affect goods declared essential for the life of the community?
No, a notification issued under the authority of a pre-Constitution Act is not a law made by the legislature of a State and therefore does not require Presidential assent under Article 286(3). (Para 14 )
9. Does a law that was ineffective due to a constitutional restriction become void or still-born if the restriction is later removed?
No, if the law was passed by a competent legislature and remained effective for other goods, it is not still-born; it becomes fully effective once the constitutional restriction is lifted. (Para 12 )
10. Can a retrospective amendment to a void section validate notifications issued under the original void section?
Yes, the retrospective insertion of a valid amended Section 5 deemed the notifications issued under the original Section 5 to be valid from the commencement of the main Act. (Para 15 )
Judgement
BACHAWAT, J. :- The respondents are dealers assessable to sales-tax under the East Punjab General Sales-tax Act, 1948. In their return for the assessment years 1935-56, 1956-57 and l957-58 they claimed exemption from tax in respect of sales of edible oils. It is common case before us that this exemption was claimed in respect of sales of edible oil produced in ghanis run by mechanical process. By his orders dated March 3, 1959, April 9, 1959 and July 17, 1959. the Assessing Authority, Jullundur held that exemption from tax was not allowable under item No. 57 of the schedule of tax-free goods as substituted by the Punjab Government Notification No. 3483-E and T-54/723(CH) dated August 5, 1954. The appeals from these orders were dismissed by the Deputy Excise and Taxation Commissioner. Jullundur Division by his orders dated August 3, 1959 and February 16, 1960. Bevision Petitions from these orders were dismissed by the Excise and Taxation Commissioner. Punjab by his orders dated November 24, 1961. Revision Petitions from the last orders were dismissed by the Financial Commissioner, Revenue, Punjab by his orders dated April 27, 1962. On the application of the respondents, the Financial Commissioner, Revenue, Punjab by his order dated August 9, 1962 referred under S. 22(1) of the Punjab General Sales-tax Act,1948 the following question of law for the decision of the High Court of Punjab at Chandigarh:
"Whether notification No. 3483-E and T -54/723(CH), dated the 5th August. 1954 whereby exemption from Sales-tax granted by the Government in respect of edible oils was abolished in the case of such edible oils produced in ghanis run by mechanical process was intra vires and not the law made by the Legislature of the State which requires the previous assent of the President of India."
These References were marked as Sales-tax References Nos. 8, 10 and 11 of 1962. By its judgment dated August 19, 1963 the High Court held following its earlier decision in Ganga Ram Suraj Prakash v. State of Punjab , (1963) 14 STC 476 (Punj) that the notification was a law made by the State Legislature after the enactment of Central Act No. 52 of 1952, and since it did not receive the assent of the President it was ultra vires and invalid. In the earlier decision, the Punjab High Court held that (1) S. 5 of the East Punjab General Sales-tax Act, 1948. as it originally stood, was invalid on the ground of excessive delegation of legislative power to the executive (2) the remaining Sections of the Act including S. 6 could not survive the invalidity of S. 5, (3) the Act did not become valid until the insertion of the new S. 5 in the main Act by the East Punjab Act No. 19 of 1952 and (4) as the East Punjab Act No. 19 of 1952 which alone could sustain the impugned notification dated August 5, 1954 was passed after the Central Act No. 52 of 1952, the impugned notification could not be justified and was invalid. The High Court observed that it was not impressed with the argument that the notification was not a law made by the legislature of the State and therefore the assent of the President could be dispensed with. The present appeals have been preferred from the orders of the High Court dated August l9. 1963.
2. To appreciate the points in controversy, it is necessary to refer to the course of legislation. The East Punjab General Sales-Tax Act (East Punjab Act No. 46 of 1948) was enacted on November 15, 1948. Section 4 of the Act provided for the incidence of taxation and declared that the classes of dealers specified in sub-ss. (1), (2), (3) and . (4) would be liable to pay tax under the Act. Section 5 (1) was in these terms:
"5. Rate of tax.-(I) 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 as the Provincial Government may by notification direct."
Turnover as defined in S. 2(1) included the aggregate of the amount of sales. Taxable turnover as defined in S. 5 (2) was
