Research › Browse › Judgment

Kerala High Court · body

1963 DIGILAW 225 (KER)

DEPUTY CAIT v. COCHIN COAL CO. LTD.

1963-08-16

M.MADHAVAN NAIR, M.S.MENON, S.VELU PILLAI

body1963
Judgment :- 1. The respondent was assessed to sales tax under the General Sales Tax Act, 1125, on inter-State sales effected between 1-4-1951 and 6 91955. The contention of the Department is that by virtue of the General Sales Tax (Amendment and Validation) Act, 1962 Act 9 of 1962 the inter-State sales within that period can be taxed, and that the conclusion to the contrary reached by the Sales Tax Appellate Tribunal cannot be sustained. The petition words the question of law raised for our decision as follows: "Whether in the light of the amending Act 9 of 1962 the finding of the Tribunal is correct?" 2. S.2 of the Sales Tax Laws Validation Act, 1956 Central Act 7 of 1956 said: "Notwithstanding any judgment, decree or order of any court, no law of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any goods where such sale or purchase took place in the course of inter-State trade or commerce during the period between the 1st day of April, 1951 and the 6th day of September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the course of inter-State trade or commerce; and all such taxes levied or collected or purporting to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law." There can be no doubt that Central Act 7 of 1956 was intended to validate State Laws imposing or authorising the imposition of taxes on the sale or purchase of goods in the course of inter-State trade or commerce. And there is the decision of the Supreme Court in The State of Kerala and others v. The Cochin Coal Company Ltd. (1951) 12 STC.1 to support the conclusion that S.26 of the General Sales Tax Act, 1125, imposes a tax on the sale or purchase of goods in the course of inter-State trade or commerce, and that the taxation of such sales during the period between 141951 and 6 91955 is validated by the Central Act. 3. 3. S.26 of the General Sales Tax Act, 1125 as it stood prior to the amendment effected by the General Sales Tax (Amendment) Act, 1957 Act 12 of 1957 read as follows: "(1) Notwithstanding anything contained in this Act, (a) a tax on the sale or purchase of goods shall not be imposed under this Act.... (i) where such sale or purchase takes place outside the State of Travancore-Cochin; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. (2) The Explanation to clause (1) of Art.286 of the Constitution of India shall apply for the interpretation of sub-clause (11 of clause (a) of sub-section (1)." The corresponding words of S.22 of the Madras General Sales Tax Act, 1939, came up for consideration in M. P. V. Sundararamier & Co. and others v. The S/ ate of Andhra Pradesh and another (1958) 9 STC. 298. The Supreme Court said: "When we find in such a statute a provision containing a prohibition followed by an Explanation which is positive in its terms, the true interpretation to be put on it is that while the prohibition is intended to prevent taxation of outside sales on the basis of the nexus doctrine, the Explanation is intended to authorise taxation of sales falling within its purview, subject of course to the other provisions of the Constitution, such as Art.286 (2)." 4. Act 12 of 1957 substituted the word "State" for the words "State of Travancore-Cochin" and omitted the words "except in so far as Parliament may by law otherwise provide" in S.26 (1) of the General Sales Tax Act, 1125. It also deleted in its entirety sub-section (2) of that section. It is Act 12 of 1957 that created trouble and raised the controversy as to whether Central Act 7 of 1956 can be considered as salvaging the levy of tax on inter-State sales after the amendment it effected to S.26 of the General Sales Tax Act, 1125. It also deleted in its entirety sub-section (2) of that section. It is Act 12 of 1957 that created trouble and raised the controversy as to whether Central Act 7 of 1956 can be considered as salvaging the levy of tax on inter-State sales after the amendment it effected to S.26 of the General Sales Tax Act, 1125. S.26 after the amendment effected by Act 12 of 1957 read as follows: "(1) Notwithstanding anything contained in this Act, (a) a tax on the sale or purchase of goods shall not be imposed under this Act (i) where such sale or purchase takes place outside the State; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce." 5. In TRC. Nos. 1, 2 & 3 of 1961 this Court held that inter-State sales after 3131951 were not taxable. The decision was based on S.26 (b) of the General Sales Tax Act, 1125, which as amended by Act 12 of 1957 and extracted above said that notwithstanding anything contained in the General Sales Tax Act, 1125, "a tax on the sale or purchase of any goods shall not, after the 31st day of March 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce." 6. The Constitution (Sixth Amendment) Act, 1956, inserted Entry 92A Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce in the Union List (List I) after Entry 92 of that List. It also substituted in the State List (List II) for Entry 54 (Taxes on the sale or purchase of goods other than newspapers) the following Entry: "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I." Ss. 3 and 4 of the Act also amended Art.269 and 286 respectively of the Constitution. 3 and 4 of the Act also amended Art.269 and 286 respectively of the Constitution. As a result of the amendment Art.269 now provides that taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce shall be levied and collected by the Government of India, and that Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. The Act also omitted the Explanation in clause (1) of Art.286 and substituted new clauses for clauses (2) & (3) of that Article. The amended Art.286 is in the following terms: "(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposts, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 7. The Constitution (Sixth Amendment) Act, 1956, came into force on 119 1956. Act 9 of 1932 was enacted subsequent to that date. It received the assent of the Governor on 17 31962 and was published in the Kerala Gazette (Extraordinary), No. 61, on the same date. 8. It is not contended that the words of the amendment will not justify the assessment. The contention of the respondent is not that the wording is inadequate but that the Act is incompetent, that the State Legislature had no power to deal with the subject after the Constitution (Sixth Amendment) Act, 1956. We are in agreement with this submission. 9. It is not contended that the words of the amendment will not justify the assessment. The contention of the respondent is not that the wording is inadequate but that the Act is incompetent, that the State Legislature had no power to deal with the subject after the Constitution (Sixth Amendment) Act, 1956. We are in agreement with this submission. 9. The validity of an enactment should be tested on the basis of the legislative power obtaining on the date on which it comes into being. A piece of legislation may be prospective or retrospective or both; but in every case the legislative competence is something that must exist when the legislation is passed and not at any other time. Ancient competence which had disappeared or future competence not yet in existence are both of no avail. The only question is: Was the Legislature competent to pass the legislation, whether prospective, retrospective or both, on the date it was engrossed in the Statute-book of the State?. 10. As stated by Willoughby: "The validity of a statute is to be tested by the constitutional power of a Legislature at the time of its enactment by that Legislature, and, if thus tested it is beyond the legislative power, it is not rendered valid, without re-enactment, if later, by constitutional amendment, the necessary legislative power is granted." Constitution of the United States, Volume I, Page II. This is a passage quoted with approval in M. P. V. Sundararamier & Co. & others v. The State of Andhra Pradesh and another (1958) 9 STC. 298. 11. In the light of what is stated above we must hold that the State Legislature had no power to pass Act 9 of 1962 on the date it was passed in view of the Constitution (Sixth Amendment) Act, 1956, and that this TRC. should fail. We decide accordingly; but without any order as to costs. 12. Mr. M. U. Isaac assisted us as amicus curiae at the hearing of the case. We record our appreciation of the assistance he has given. Dismissed.