# $02 HIRA LAL RATTAN LAL ETC. ETC v. STATE OF U.P. AND ANR. ETC. ETC - **Citation:** [1973] 2 S.C.R. 502 - **Court:** Supreme Court of India - **Decided:** 1972-10-03 - **Case number:** Civil Appeals Nos. 821 and c D E F 822 of 1971 - **Bench:** K. ·s. HEGDE, P. ]Aganmohan Reddy, 1. D. Dua, H. R. Khanna - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/02-hira-lal-rattan-lal-etc-etc-v-state-of-u-p-and-anr-etc-etc-5869 - **Pages:** 14 ## Headnote B U.P. Saks fox Act 1948 11s 11111cmled by the Urtar Pradesh Sale;· Tax Act (A111c11dme111 and Validatio11) Act 1970, s. 3·D, e.tp/anatio11 11, validity of-S. 7 whether i•Oectfre for retrospective operation of exp/anatio11 ll-Sil1gle p<>illf tc.~ 011 first purchase of split foodgrains wl1etl1er' kvlable 11111/er 11111<•11decl Act-Explanation II whether an· unJ.awful 11.11rpatlo11 of judicial po/11ts-W/letl1er violates Art. 14 or 19( I) (f) and (g) of Con· stit11tio11-Ta.r 011 spilt grains ll'hether levlable· without qme11ding notifi. 'C <"11tion 11111/er s. 3-D-Section 3-D ll'hether suffers from excessive cle/egatiou of lt•g;.,·lt11ire polvers. Cndcr the U.P; Sale11 Tax Act 1948 as it originally stood· the ~ chases of split or processed foodgrai;r,s and illf tc.~ 011 first purchase of split foodgrains wl1etl1er' kvlable 11111/er 11111<•11decl Act-Explanation II whether an· unJ.awful 11.11rpatlo11 of judicial po/11ts-W/letl1er violates Art. 14 or 19( I) (f) and (g) of Con· stit11tio11-Ta.r 011 spilt grains ll'hether levlable· without qme11ding notifi. 'C <"11tion 11111/er s. 3-D-Section 3-D ll'hether suffers from excessive cle/egatiou of lt•g;.,·lt11ire polvers. Cndcr the U.P; Sale11 Tax Act 1948 as it originally stood· the ~ chases of split or processed foodgrai;r,s and - cessed or unsplit foodgra~. Consequtntly while reading the expression "foodgrains" in the notification also the same approach must be adopted. This conclusion is also obvious from s. 7 which says in plain words that the notification must be deemed to have been issued under s. 3-D as amended. While a taxing statute must be strictly construed, but that does not mean that a provision in a taxing statute should not be read reasonably. [ 514 HJ (viii) Section 3 ·D does not suffer from the vice of delegation of legislative power to the executive. Jn the Act under s. 3 the legislature has sought to impose multi-point tax on all ·sales and purchase. At'ter having done that it has given power to the executive, a hi&h authority and which is presumed to command the majority support in the legislative, to select. for special treatment dealings in certain class of goods. Jn the very iooture 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 o. single point sales or purchase tax. Before making such selections several aspects such as the impact of the levy on the society, economic consequences anJ the adm(r,istrative convenience will !rave to bt 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 executive. [515 BJ Pt. Bunarsi Das Bhanot and ors. 1•. 1'he Stale of ,._,fadh)'a Pn1desh anti others, [I 959] S.C.R. 427. referred to. CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 821 and c D E F 822 of 1971. G Appeals by certificates from the judgment and orders dated July 14, and August 22, 1970 of the Allahabad High Court in -Civil Misc. Writ Petitions Nos. 957 and 3784 of 1970. Civil Appeals Nos. 1625 and 2008 of 1971. Appeals by certificates from the judgments and orders dated July 14, 1970 of the Allahabad High Court at Allahabad in Civil Misc. Writ Nos. 953 and 928 of 1970. H A HIRA LAL v. U.P. STATE (Hegde, J.) SQS Som Nath Iyer, R. G. Sharma and Subodh Markendeya, for the appellant (in C. As. Nos. 821-822/71 ). S. T. Desai, R. K. Upadhya, P. C. Bhartari, Ravinder Narain, for the appellant, (in C. A. No. 1625/71). M. C. Chag/a, Anil B. Divanji, P. C. Bhartari and Ravinder B Narain for the appellants, fin C.A. No. 2008/71). c D E F G H O. P. Rana and Ravindra Bana, for the' respondents (in C. As. Nos. 821-822/71). N. D. Karkhanis, 0. P. Rana and Rtivindra Bona, for the respondents (in C. A. No. 1625/71). S. C. Manchanda, 0. P. Rana and Ravilulra Bona, for the resppndents. (in C. A. No. 2008/71). ' The Judgment of the Court was delivered by HEGDE, 1. These are appeals by certificate. They raise common questions of law for decision, and they are directed against a common judgment of the Allahabad High Court. 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 inade by the appellants of split processed foodgrains and dal under the provisions of the United Provinces 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). 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 s. 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 daf mills and accordingly the purchases effected ~y the petitioner could not be regarded as the first purchases. This decision is reported in 25, S.T.C. p. 118. Thereafter the Governor of U.P. issued an ordinance known as Uttar Pradesh Sal7s Tax (Amendment and Validation) Ordinance, 1970 (U.P. Ordmance 506 SUPREME COURT REPORTS [1973] 2 S.C.R. No. 2 of 1970) adding inter alia Explanation II to s. 3-D as well as s. 7 to the principal Act. This ordinance was later on enacted as an Act to which we have already made reference. The provisivns 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, th~ Amending Act came into force during the pendency of the writ petitions. Hence we shall refer to the provisions of the Amending Act. Under the principal Act a dealer is defined ins. 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). Section 3 of the Act provides for the levy of multi-point tax. The portion of that section which is material tor our present purpose reads: "Subject to the provisions of this Act, every dealer shall. for each assessment year, pay, a ~ax 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 .... " Section 3-A provides for a single point taxation in resp~ct of sale of certain goods. At present we are only concerned with s. 3-D( I). 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). A B c D E F G ff \ A B c D E F G H HIRA LAL v. U.P. STATE (Hel!'de, J.) 507 The notification issued under s. 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 s. 3-D at the rate mentioned : "Foodgrains 1.5 paise per rupee on firs: purchases x x x x" On the basis of s. 3-D read with the notification, as mentioned earlier, the authorities unower by the legislature; (4) The newly added Explanation II to s. 3-D is violative of Art. 14 of tire Constitution. There is no rational basis for separating split or processed pulses from unspli(or unprocessed pulses; ( 5) On a true construction of Explanation II to s. 3-D no fresh charge can be held to have been imposed: ( 6) No levy of purchasei tax can be made without a fresh Notification under s. 3-D read with Explanation II showing therein separately foodgrains unsplit cir unprocessed as well as foodgrains ·split or processed; and ( 7) That the power conferred on the Government under s. 3-D amounts to an excessive delegation of legislative power and consequently void. The source of the legislative power to levy sales or purchase tax on goods is Entry 54 of the i,ist JI of. the Constitution. It is well settled. that subject to constitutional restrictions a power to legislate includes a power to legislate prospectively as well as retrospectively. . In this -regard legislative powtr to impose tax also includes. within itself the power to tax retrospectiv'ely-seeThe Unio11 of India v. Madan Gopa/ Kabra;(') M. P. Sundara· ramier & Co. v. The State of Andhra Pradesh and Anr. (a);· J. I<.. Jute Mills Co. Ltd. v. The State of Uttar Pradesh and Anr.;(8 ) Chhotabilai• Jethabhai Patel and Co. v. The Union of llzdia .and Anr.~'); Sri Ramkrishr]a & Ors. v.' Th . contentiol) tltat. the legislature has usurped any judicial power. The legislature has not purported either directly or by necessary implication io -overrule the decisions of the Allahabad High Court in Tilok Chand Prasan Kumar's case (supra). On the other hand it has accepted that decision as correct; but has sought -to remove the basis of that decision by retrospectively changing the law. This E Court has p0inted out"in several cases-the distinction between the encroachment on the judicial power and the nullification of the effect of a judicial decision by changing the law retrospectively. The former is . .outside the competence of the legislature but the latter- is within its permissible limits. From the statement of objects and reasons, it appears that in' the principal Act, the legisF lative in_tent was not clearly brought out. By means of the · Amending Act the legisfature Wanted to make clear its intent. The fourth contention also appears to be without any basis. It is true that the taxing statutes are not outside the scope of Art. 14 of the Constitution, But the legislaturn has wide powers of clas<.ification in the case of taxing statutes. Tn Jagannath's case (supra), this Court ruled that-there was no unconstitutional discrimination in the imposition of the excise duty on tobacco in the broken leaf form. Therein it was observed ·that tobacco in the broken leaf form was canable of being used in the manufacture of bidis while tobacco in the whole leaf form could not be so used economically; the two forms of 1nbacco were different bv the test of capability of user; the tariff is not based either wholly or even primarily by reference to the (I) [19621 2 S.C.R. 118. G II HIRA LAL' v. U.P. STATE (Hegde, J.) 5 11 A use of tobacco and there was a clear and unambiguous distinction between tobacco in the whole leaf form covered by item 5 and tobacco in the broken leaf form covered by item 6 wllich had a reasonable relation to the object intended by the imposition of the tariff. B c D E F H In Khandige Sl@n Bhat and Ors. v. The Agricultural Income Tax Officer, (1) this Court iaid down the tests to fmd out whether there are discriminatory provisions in a taxing statute. Therein this Court observed that in' order to judge whether a law was discriminatory what had primarily to be looked into was not !'ts phraseology but its reaJ effect. If ,there was equality and uniformity within each group, the law .could ·not. be discriminatory, though due to fortuitous circumstances in a peculiar situation some included in a class might get some advantage over others, so Jong as they were not sought out for spebial treatment. Although taxation laws could be no exception to this rule, the courts would, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification so long as there was no transgression of the fw1da- · mental principles underlying the doctrine of classification. The power ·of the legislature to classify must necessarily be wide and flexible so as to enable it to adjust its system of taxation in all proper and reasonable ways. It must be noticed that generally speaking the primary purpose of the levy of all taxes is to raise funds for public good. · W)lich person should be taxed, what transaction should be taxed or what g00C.; .should be taxed; depends upon social, economic and administrative ·considerations. In a democratic set up it is for the. legislature to decide what economic cir social policy it should' pursue or what administrative consideration it should bear in mind. The classification bet.ween the processed or split pulses and unprocessed or unsplit pulses is a reasonable classification. It is based on the use to which those goods can be put. Hence, in our opi.iion, the impugned classification is not violative of Art. 14. A feeble attempt was made to show that "the retrospective levy made under the Act is vio!Qtive of Art. 19(l)(f) and (g). But we see no substance in that contention. As seen earlier, the amendment of the Act was necessitated because of the legislature's failure to bring out clearly in the princioal Act its intention to. 'eparate the processed. or split pulses from the unsolit or unprocessed pul>es. Further the retrospective amendment bcame necessary as otherwise the State would have to refund large sum of money. The contention that the retrosoective levy did not.afford any opportunity to the dealers to pass on the tax payable to the co1iq1mcrs. has not much validity. The tax is levied 011 the dealer: --· ~ ! ! [19hYl 3 S.C.R. ~09. 512 ~UPREME COllRT REPORT~ [197)] 2 S.C.R. the fact that he is allowed to pass on the tax to the consumers or he is generally in a position to pass on the same to the consumer has no relevance when we consider the legislative competence. It was next urged that on a true contribution of Explanation li to s. 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 and the foremost rule of construction is the literary construction. {\l'I that we have to sec at the very outset is wbat does that provision say ? If the provision is unambiguous and if from that 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 intention 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. thei fact that a provision is called proviso, it is really a separate provision and the socalled proviso h&s substantially altered the main section. In Commissioner of Jni:omc·tax, Bombay Cily. Bombay v. Bipinchandra Magan/a/ & Co. Ltd .. Bombay,(') this Court held that by the fiction in s. 10(2) (vii) second proviso read withs. 2 (6C) of the Indian Income-tax Act, 1922 what is really not income is, for the .purpose of computation of assessable inc9me, made taxable income. Jn State of Rajast/11111 v. Lee/a Jain('), 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 s. 4 (I). There is, therefore, no question ot 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 estabJ,ish that the proviso now before us is rea!ly not a proviso in the accepied 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 coextensive with but covers a field wider than the main part Qf s. 4(1)". Jn Bihta Co-operative Deve/opme11t Cane Marketing Union Lid. and Anr. v. Bank of Bihar and Ors. (3 ) this Court wa§ called upon to consider the Explanation to s. 48(1) of the Bihnr and (I 1 [1961] 2 S.C.R. 493. (2) [1965] 1 S.C.R. 276. (.1) [l967J I S.C.R. R4R. A B c D E F G H HIRA LA.L v. U.P. STATE (Hegde, J.) K Orissa Co-operative Societies Act, 1935. Therein this Court observed: B c D E F G H "The question then arises whether the first Explanation to the section widens the scope of sub-s. ( t) of s. 48 so as to include claims by registered societies against non-members even if the same are not covered by clause ( c) ." 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 ari Explanation it appears that it has widened the scope of the main section, effect must be given to the legislative intent notwithstanding the fact that the legislature narr.ed that provision as an Explanation. In all these matters the courts have to find out the true intention of the legislature. We are unable to accept the contention that Explanation II to s. 3-D did not widen tht. scope of s. 3-D. Section 3-D as it originally stood dealt with foodgrains and pulses. lt 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 s. 3-D as containing two separate Hems 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 well. We next come to the contention that no levy of purchase tax can be made on split or unprocessed pulses without ·a fresh notification under s. 3-D read with Explanation II showing therein separately foodgrains unsplit or unprocessed as well as foodgrain5 split or processed. As seen earlier that 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 i.ssued under s. 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 foodgrajns. Consequently while readi112 the expression "foodgrains" in the notification also, we must ~dopt the same approach. This conclusion is also obvious from s. 7. If the le~siature had not retrosoectively validated the assessments made o.n' the first purchase' of split or processed foodgrain. what did s. 7 seek to achieve ? That section says in plain words that not- 514 SUPREME COURT REPORTS [1973] 2 S.C.R, wit.'lstanding any judgment, decree or order of any court or tribunal to the contrary, every notification issued or purporting to have been issued under s. 3-D Of the principal Act. before the comn mcement 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, procedings taken, jurisdiction exercised, assessment made, or tax levied, co1lected 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. We asked the learned Co~nsel appearing for the appellants to let us know the field in which s. 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 th" defective phraseology employed in Explanation II to s. 3-D and s. 7 of the Amending Act. In other words their submission was that s. 7 has become otios. It was urged on behalf of the appellants that a trucing 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 section. There is no doubt that a taxing provision ha~ to be strictly interpreted. If any legislature intencls 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 s. 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 Milli' case (supra) observed at p. 435 : "The object of the legislation as stated in the Jong 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 tha1 is possible, be avoided." We have earlier come to the conclusion that because Explanation II to s. 3-D the expression "foodgrains including pulses" in s. 3-D should be read as including two different items i.e., (1) A B c D E F G H A B c D E F G lilRA LAL v. U.P. STATE (Hegde, /.) 515 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 iri the light of s. 3-D, Explanation II to that section and s. 7 of the Act. .The only remaining contention is that the delegation f'.lade lO the executive under s. 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 persons on whom the tax is to be levied or the goods or the transactions on which the tax is to be !!!vied. In the Act, under s. 3 the legislature has sought to impose multi-point tax on all sales and purchases. After ha-ring 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 legisiature 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 convtni~nce 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 executive. In Pt. Banarsi Das Bhanot and Ors. v. The State of Madhya Pradesh and Ors.(') the question arose whether it was pennissiblc for the legislature to ~.npower .the executive to amend the Schedule relating to exemptions. This Court by majority answered that question in the affirmative. It further held that it is not u-nconstitutional 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 persons 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. We have not found any substance in any of the contentions advanced on behalf of the appellants. Hence these appeals fail and they are dismissed with costs--hearing fee one set. G.C. Appeal$ dismissed. (I) [ 1959] S.CR. 427.