# [1964] 6 S.C.R. 867 - **Citation:** [1964] 6 S.C.R. 867 - **Court:** Supreme Court of India - **Decided:** 1964-02-21 - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1964-6-s-c-r-867-3226 - **Pages:** 10 ## Headnote 6 S.C.R. SUPREME COURT REPORTS llllnd on a different footing from new assessments after the l9tll new law comes into force. It is true that Parliament providB•"'""'•' ed otherwise in this case and the Finance Act of 1950 said Milb that the old assessments would be carried on by the cnrres- s1au ofv. Modlryl. ponding officers under the Indian Income Tax Act. l;Jy misBltarrd take however that provision was overlooked and the old W011Choo 1. assessments were made by the old officers under the ofd law. All that Parliament did by the Validating Act was to allow the old assessments to be made under the procedure provided under the old law and we can see no discrimination in the Validating Act on account of this fact. We are therefore of opinion that the Validating Act is not hit by Art. 14. Further we have not been able to understand how the validation is of no effect so far as the present cases are concerned. The present cases are with reference to years I 940-48, that is before the accounting year ending on March 31, 1949. The assessments in these cases were carried on by the old officers under the old law and the Validating Act specifically validates such assessments. In these circumstances we havo not been able to understand how it can be sa td that these assessments have not been validated by the Validating Act. The contention under this head must therefore also fail. The appeal fails and is hereby dismissed with costs. Appeal dismissM. R. ABDUL QUADER AND CO. ". SALES TAX OFFICER, HYDERABAD IP. B. GAJENDRAGADKAR, C.1., K. N. WANCHOO, K. C. DAS GUPTA, J. C. SHAH AND N. RAJAGOPALA AYYANGAll, JJ.) klt1 Taz-Taz Collected otherwise than In accordance wltls tlae A.clProvi1ion enabling the Government to recover 1uch tax collt!ct6dNot within tM competence of State Legisl01urt'--Connitlllion II/ India, Schedule VII, Entry 26 and 54 of List 11-Hyd•robad 0.IWllll Salei Taz Act, 1950 (XII' of 1950), 1. 11. 1961 F•bTllOrJ Ile 868 SUPREME COURT REPORTS 1961 The appellant collected sales tax from the purchasers of betel leaves R. Abdul Quader in connection with the sales made by iL But it did not pay the amount . v. collected to the Government. The Government directed the appellant Saki Taz Officer to pay the amount to the Government and it thereupon filed a writ petition in the High Court questioni112 the validity of s. 11(2) of tho Hyderabad General Sales Tax Act. 1950. Tho main contention ot the appellant before the High Court waa that s. 11 (2) of the Act which authorises the Government to recover a tax collected without the authority of law was beyond the competence of the Stale Legislature because a tax collected without the authority of law would not be a tax levied under the )aw and it would therefore Dot be open to the State to collect under the authority of a Jaw enacted under the Entry 54 of List II of the· VII Schedule to the Constitution any such amount as it was not a tax on sale or purchase of good•. The High Court held that s. 11 (2) was good· as an ancillary provision with regard to the collectiqp of sales or purchase tax and therefore incidental to tho power under Entry 54, List II. The High Court also beld that even if s. 11(2) cannot be justified under that entry it could bo justified under Entry 26, List II and in the result the writ petition was dismissed. The present appeal is bY way of special leave granted by this Court. Held: (i) It cannot bo said that the State Legislature was directly legislating for the imposition of sales or purchase tax under Entry 54, List II when it made the provisions of s. 11 (2) for on tho face of tho provisions the amount, though collected bY way of tax was Dot eiigible as tax under tho law. (ii) II Is trno that the heads of legislation in tho varions li•b In tho Seventh Schedule should be interpreted widely so as to tato in all maltero which are ot a character incidental to tho topic mentioned therein. Even so there is a limit to ouch incidents! or ancillary powen. These have to be exerc ## Text 6 S.C.R. SUPREME COURT REPORTS llllnd on a different footing from new assessments after the l9tll new law comes into force. It is true that Parliament providB•"'""'•' ed otherwise in this case and the Finance Act of 1950 said Milb that the old assessments would be carried on by the cnrres- s1au ofv. Modlryl. ponding officers under the Indian Income Tax Act. l;Jy misBltarrd take however that provision was overlooked and the old W011Choo 1. assessments were made by the old officers under the ofd law. All that Parliament did by the Validating Act was to allow the old assessments to be made under the procedure provided under the old law and we can see no discrimination in the Validating Act on account of this fact. We are therefore of opinion that the Validating Act is not hit by Art. 14. Further we have not been able to understand how the validation is of no effect so far as the present cases are concerned. The present cases are with reference to years I 940-48, that is before the accounting year ending on March 31, 1949. The assessments in these cases were carried on by the old officers under the old law and the Validating Act specifically validates such assessments. In these circumstances we havo not been able to understand how it can be sa td that these assessments have not been validated by the Validating Act. The contention under this head must therefore also fail. The appeal fails and is hereby dismissed with costs. Appeal dismissM. R. ABDUL QUADER AND CO. ". SALES TAX OFFICER, HYDERABAD IP. B. GAJENDRAGADKAR, C.1., K. N. WANCHOO, K. C. DAS GUPTA, J. C. SHAH AND N. RAJAGOPALA AYYANGAll, JJ.) klt1 Taz-Taz Collected otherwise than In accordance wltls tlae A.clProvi1ion enabling the Government to recover 1uch tax collt!ct6dNot within tM competence of State Legisl01urt'--Connitlllion II/ India, Schedule VII, Entry 26 and 54 of List 11-Hyd•robad 0.IWllll Salei Taz Act, 1950 (XII' of 1950), 1. 11. 1961 F•bTllOrJ Ile 868 SUPREME COURT REPORTS 1961 The appellant collected sales tax from the purchasers of betel leaves R. Abdul Quader in connection with the sales made by iL But it did not pay the amount . v. collected to the Government. The Government directed the appellant Saki Taz Officer to pay the amount to the Government and it thereupon filed a writ petition in the High Court questioni112 the validity of s. 11(2) of tho Hyderabad General Sales Tax Act. 1950. Tho main contention ot the appellant before the High Court waa that s. 11 (2) of the Act which authorises the Government to recover a tax collected without the authority of law was beyond the competence of the Stale Legislature because a tax collected without the authority of law would not be a tax levied under the )aw and it would therefore Dot be open to the State to collect under the authority of a Jaw enacted under the Entry 54 of List II of the· VII Schedule to the Constitution any such amount as it was not a tax on sale or purchase of good•. The High Court held that s. 11 (2) was good· as an ancillary provision with regard to the collectiqp of sales or purchase tax and therefore incidental to tho power under Entry 54, List II. The High Court also beld that even if s. 11(2) cannot be justified under that entry it could bo justified under Entry 26, List II and in the result the writ petition was dismissed. The present appeal is bY way of special leave granted by this Court. Held: (i) It cannot bo said that the State Legislature was directly legislating for the imposition of sales or purchase tax under Entry 54, List II when it made the provisions of s. 11 (2) for on tho face of tho provisions the amount, though collected bY way of tax was Dot eiigible as tax under tho law. (ii) II Is trno that the heads of legislation in tho varions li•b In tho Seventh Schedule should be interpreted widely so as to tato in all maltero which are ot a character incidental to tho topic mentioned therein. Even so there is a limit to ouch incidents! or ancillary powen. These have to be exercned in aid of the i'nain topic of legi•lation, which in the present case n a tax on sale or purchase ot goods. 'Ilic ambit of ancillary or incidental power> does not go to the eitent of permitting the legislature to provide that though the amount collected, may be wrongly, by way of tax is Dot exigib!e under the Jaw as made UDder the relevant taxing entry, it shall still be paid over to the Goven>o moot as if it were a tax. Therefore the provision contained in 1. 11(2) ....,,,ot be made under Entry 54, List II and cannot be justified evea as incidental or ancillary provisions permitted under that l!nby. (iii) Section 11 (2) cannot be justified as providing for a penaltJ for tho breach of any provision of the Act. (Iv) Entry 26, I.isl II deals with trade and commerce and II» aothing to do with taxing or teVering amounb realised wrongly 11 tax. There is no element of regulalion of trade and commerce in a prm•nion lite s. 11(2) and therefore that oectlo11 cannot be IUl1illl4 ander Entry 26, List n. 6 S.C.R. SUPREME COURT REPORTS 869 1961 (Y) Tho provision in •· 20(c) is also innlid as ii ii merely consequential to 1. 11(2). R. .A.bdu/ Qllllllrr The Orient Papers Mills Ltd. v. State of Orissa, (1962] 1 S.C.R. S49, S 1 T;;, 0 ,,,_ .,_,_ . b d ... uw.uugws e . State of Bombay v. United Motor1 (India) Ltd., [1953] S.C.R. 1069, referred to. Indian Aluminium Co. v. State of Madra1, (1962) XIII Sales Tu Cases 967, held to be wrongly decided. CIVIL APPELLATE 'JURISDICTION: Civil Aippeal No. 760 of 1962. Appeal by special leave from the judgment and order dated July 16, 1959 of the Andhra Pradesh High Court in Writ Petition No. 1123 of 1956. K. R. Chaudhuri, for the appellant. A. Ranganadham Chetty and B. R. G. ~- Achar, for the respondent. February 21, 1964. The Judgment of the Court was delivered by WANCHoo J.-This'is an appeal by special leave against Wane/loo 1. the order of the Andhra Pradesh High Court. The appellant filed a writ petition in the High Court questioning the validity of s. 11 (2) of the Hyderabad General Sales Tax Act, No. XIV of 1950, (hereinafter referred to a~ tbe Act). The material facts on which the petition was b~sed were these. The appellant acted as agent in the tlwn Stdte of Hyderabad to both resident and non-resident principals in regard to sale of betel leaves. Under the Act betel lea,·es were taxable at the purchase point from May I, 1953, by virtue of a notification in that behalf. We are here concerned with the a5sessment period from May I, 1953 to March 31, 1954, covered by the assessment year 1953-54. The appellant collected sales tax from the purchasers in connection with the sales made by it on the basis that the incident of the tax lay on the sellers and assured the purchasers that after paying the tax to the appellant, there would be no further liability on them. After realising the tax. however, the appellant did not pay the amount realised to the Government but kept it in the suspense account of its principals, namely, SUPREME COURT RE!>ORTS [rQ64~ .1'64 the purchasers. When the accounts were scrutinii.ed by the .. Abd;;Quad., Sales Tax Department, this was discovered and thereupon the •· appellant was called upon to pay the amounts realised to the ..,_ T!:..._Offi«r Government. The appellant however objected to the payIPaclloo I. ment on the ground that it was the seller and the relevant notification for the relevant period imposed tax at the purchase point, i.e. on the purchaser. This objection was over-ruled and the appellant was directed to pay the amount to Government. The main contention raised on behalf of the appellant in the High Court was that s. II (2) of the Act, which authorised the Government to recover from any person, who had · collected or collects, after May I, 1950, any amount by way of tax otherwise than in accordance with !he provisions of the Act, as arrears of land revenue, was beyond the legislative Ci>mpetance of the State legislature. The argument was that the Act was passed under Entry 54 of List IJ of the Seventh Schedule to the Constitution, which eflables the State legislature to enact a law taxing transactions of sale or purchase of goods. The entry therefore vests power in the State legislature to make a law for taxing sales and purchases of goods and for making all necessary incidental provisions in that behalf for the levy and collection of sales or purchase tax. But it was urged that that entry did not empower the State legislature to enact a Jaw by which a dealer who may have collected a tax without authority is required to hand over the amount to Government, as any collection without the authority of law would not be a tax levied under the law and it would therefore not be open to the State to collect under the authority of a law enacted under Entry 54 of List II any such amount as it was not a tax on sale or purchase of goods. The High Court held s. 11 (2) good as an ancillary provision with regard to the collection of sales or purchase tax and therefore incidental to the taxing power under Entry 54 of List II. Further the High Court took the view that assuming that Entry 54 of List II could not sustain s. 11 ( 2), it could be sustained under Entry 26 of List II. Consequently the writ petition was djsmissed. The High Court having refused a certificate to appeal to this Court, the appellant obtained special leave and that is how the matter has come up before us. 6 S.C.R. SUPREME COURT REPORTS It is necessary to read s. 11 of the Act in order to appre1964 elate the point urged on behalf of the appellant. Section R. .tbdM'""i°QU4d 11 is in these terms:- •· Sah1 Ta ()6ica "ll(l) No person who is not registered as a dealer - •hall collect any amount by way of tax under Wanchoo I. this Act' nor shall a registered dealer make any such collection before the 1st day of May, 1950. except in accordance with such conditions and restrictions, if any, as may be prescribed : Provided that Government may exempt persons who are not registered dealers from the provisions of this sub-section until such date, not being later than the lst day of June, 1950, as Government may direct. 12) Notwithstanding to the contrary contained in any nrder of an officer or tribunal or judgment, decree or order of a Court, every pe1son who has collected or collects on or before 1st May, 1950, any amount by way of tax otherwise than in accordance. with the provisions of this Act shall pay over to the Government within such time and in such manner as may be prescrihed the amount so collected by him, and in default of such payment the said amount shall be i:!covered from him as if it were arrears of land reveoue." It will be seen that s. ll (l) forbids an unregistered dealer from collecting any amount by way of tax under the Act That provision however does not apply in the present case, for the appellant is admittedly a registered dealer. Further s. 11 (l) lays down that a registered dealer shall not make any such collection before May 1, 1950, except in accordance with such conditions and restrictions, if any, as may be prescribed. This provision again does not apply, for we are not concerned here with any collection made by the appellant before May ·l, 1950. The prohibition therefore of s. It (l) did not apply to the appellant. Then comes s. 11 (2). It applies to collections made after May I, 1950 by any person whether a registered dealer or otherwise and lays down that any amount collected by way of tax otherwise than in accordance with the provisions of the Act &ball be paid over to 87.l SUPREME COURT REPORTS [1964) 1~ the Government and in default of such payment, the said R. Abdul Quader amount shall be recovered from such person as if it were • / ~ v. Offe arrears of land revenue. It is clear from the words "other-' .,a., iax cer . th . d .th th . . ti. A " th _ . wise an m accor ance w1 e prov1S1ons of !IS ct at Wanchoo I. though the amount may have been collected by way of tax it was not exigible as tax under the Act. Section 11 (2) thus provides that amounts collected by way of tax though not exigible as tax under the Act sha!l be paid over to (jovernment, and if not paid over they shall be recovered from such person as if they were arrears of land revenue. Clearly therefore s. 11 (2) as it stands provides for recovery of an amount collected by way of tax as arrears of land revenue though the amount was not due as tax under the Act. The first question therefore that falls for consideration is whether it was open to the State legislature under its powers under Entry 54 of List II to make a provision to the effect that I11oney co!leeted by way of tax, even though it is not due as a tax under the Act, shall be made over to Government. Now it is clear that the sums so collected by way of tax are not in fact tax exigible under the Act. So it cannot be said that the State legislature was directly legislating for the imposition of sales or purchase tax under Entry 54 of List II when it made such a provision, for on the face of the provision, the amount, though collected by way of tax, was not exigible as tax under the law. The provision however is attempted to be justified on the ground that though it may not be open to a State legislature to make provision for the recovery of an amount which is not a tax under Entry 54 of List II in a law made for that purpose, it. would still be open to the legislature to provide for paying over all the amounts collected by way of tax by persons, even though they really are not exigible as tax, as part of the incidental and ancillary power to make provision for the levy and collection of such tax. t.: ow there is no dispute that the heads of legislation in the various Lists in the Seventh Schedule should be interpreted widely so as to take in all matters ·whkh ari: of a 'haracter incidental tt> the topics mentioned tho:rein. Even so, there is a limit to such incidental or ancillary power flowing from the legislative entries in the various Lists in the Seventh Schedule. These incidental and ancillary powers have to be exercised in aid of the main topic of legislation. 6 S.C.R. SUPREME COURT REPORTS which in the pn:sent case, is a tax on sale or purchase of 1961 g0ods. All powers necessary for the levy and collection of R. Abdul Qll