# COMMISSIONER OF SALES TAX, U.P v. BIJLI COTTON MILLS, HATHRAS IP. B. GAJENDRAGADKAR, C.J., K. N. WAINCHOO, J. c. SHAH

- **Citation:** [1964] 7 S.C.R. 383
- **Court:** Supreme Court of India
- **Decided:** 1964-03-20
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-sales-tax-u-p-v-bijli-cotton-mills-hathras-ip-b-gajendragadkar-3133
- **Pages:** 8

## Headnote

78.C.R.
SUPRE:ME COURT REPORTS
383
COMMISSIONER OF SALES TAX, U.P.
v.
BIJLI COTTON MILLS, HATHRAS
IP. B. GAJENDRAGADKAR, C.J., K. N. WAINCHOO, J. c. SHAH,
N. RAJAGOPALA AYYANGAR AND S. M. SIKRI, JJ.]
Sales Tax-Reference under Act pending before High Court
-Impugned !egis!ation in relation to the matter in reference
amended-High Court whether can take cognisance· of am•nded
legis!ation-U.P. Sa!es Tax Act, 1948 (U.P. Act 15 of 1948), ss. 3A,
31.
The respondent is a manufacturer of cotton yarn and is
registered as a dealer under the U.P. Sales Tax Act, 1948. This
act came into force on April 1, 1948. Under this Act, sales tax was
payable on sales of cotton yarn at a uniform rate of 3 pies in a
rupee. Under s. 3(A) of the Act the Government of U.P. issued a
not'fication declaring that with effect from June 9, 1948, the
Sales Tax would be charged at the rate of six pies per rupee in
respect of sales of the cotton yarn. In the present case, the
assessee had opted under s, 7 of the Act to be assessed on the
turnover of previous year. The Sales Tax Officer held on the
basis of the notification dated June 9, 1948, that the rate of three
pies per rupee in r~spect of sales of cotton yarn was to apply in
the year of assessment for the first 69 days and for the remaining part of the year the rate of six pies per rupee was to .apply.
The decision of the Sales Tax Officer was affirmed by the Judge
(Revisions) Sales Tax. The Judge referred the case to the High
Court. On reference the High Court held on the basis of its
judgment in Modi Food Products Ltd. that the rate of three pies
per rupee would apply for the assessment of 1948-49 because the
assessee had opted under s. 7 to be assessed on the basis of the
turnover of the previous year. In the meantime the legislature
of Uttar Prade5h by Act III of 1963 enacted s. 31 which makes
Sales-tax exigible from an assessee who has opted to pay tax .on
the turnover of the previous year, as if the altered rates were
in force during the previous year. The amendment is given retroactive operation and applies to assessments oending or closed.
The question for consideration before this Court was whether
this Amending Act would apply to the present assessment.
He!d: (i) 'l'he law found incorporated in s. 31 by Amending
Act III of 1963 would apply to the present case. This Court in
giving its opinion on the question in the light of the amending
Act is seeking to apply a legislative provision which was, by
express enactment, in force at the time when the liability arose,
for s. 31 enacted by Act III of 1963 is to be deemed to have been
in operation at all material times in supersession of the previous
law declared by this Court in Modi Sugar Mills Ltd.'s case. This
Court is, therefore, not seeking to apply any Jaw to the question
posed before the High Court which was not in force on the date
of the transaction which is the subject-matter of the reference
Modi Food Products Ltd. v. Commissioner of S_ales-tax, U.P.
A.I.R. 1956 All. 35 and Commissioner of Sales-tax, U.P. v. Modi
Sugar Mills Ltd., [1961) 2. S.C.R. 189 explained.
1964
March 2()
384
SUPREME COURT REPORTS
[1964]
1964
(ii) When the question has been referred to the High Court
-OvmmissWnrr of and in the meantime the law has been amended with retroactive
Sal•·• Tnx, U.P.
operation, it would be the duty of the High Court to apply the
,..
law so amended as if it applies. By taking notice of the law
llijli Collon ~N/,, which has been substituted for the original provision, the High
llriJhra.9
Court is giving effect to tr.e legislative intent and docs no more
than what must be deemed to be necessarily implicit in the
question referred by the Tribunal, provided the question is
couched in terms of sufficient amplitude to cover an enquiry into
the question in the light of the amended law, and the enquiry
does not necessitate investigation of fresh facts.
MI s. Chatturam Horilram Ltd. v. Commissioner of Income·
tax, Bihar and Orissa, {1955] 2 S.C.R. 290 and M

## Text

78.C.R.
SUPRE:ME COURT REPORTS
383
COMMISSIONER OF SALES TAX, U.P.
v.
BIJLI COTTON MILLS, HATHRAS
IP. B. GAJENDRAGADKAR, C.J., K. N. WAINCHOO, J. c. SHAH,
N. RAJAGOPALA AYYANGAR AND S. M. SIKRI, JJ.]
Sales Tax-Reference under Act pending before High Court
-Impugned !egis!ation in relation to the matter in reference
amended-High Court whether can take cognisance· of am•nded
legis!ation-U.P. Sa!es Tax Act, 1948 (U.P. Act 15 of 1948), ss. 3A,
31.
The respondent is a manufacturer of cotton yarn and is
registered as a dealer under the U.P. Sales Tax Act, 1948. This
act came into force on April 1, 1948. Under this Act, sales tax was
payable on sales of cotton yarn at a uniform rate of 3 pies in a
rupee. Under s. 3(A) of the Act the Government of U.P. issued a
not'fication declaring that with effect from June 9, 1948, the
Sales Tax would be charged at the rate of six pies per rupee in
respect of sales of the cotton yarn. In the present case, the
assessee had opted under s, 7 of the Act to be assessed on the
turnover of previous year. The Sales Tax Officer held on the
basis of the notification dated June 9, 1948, that the rate of three
pies per rupee in r~spect of sales of cotton yarn was to apply in
the year of assessment for the first 69 days and for the remaining part of the year the rate of six pies per rupee was to .apply.
The decision of the Sales Tax Officer was affirmed by the Judge
(Revisions) Sales Tax. The Judge referred the case to the High
Court. On reference the High Court held on the basis of its
judgment in Modi Food Products Ltd. that the rate of three pies
per rupee would apply for the assessment of 1948-49 because the
assessee had opted under s. 7 to be assessed on the basis of the
turnover of the previous year. In the meantime the legislature
of Uttar Prade5h by Act III of 1963 enacted s. 31 which makes
Sales-tax exigible from an assessee who has opted to pay tax .on
the turnover of the previous year, as if the altered rates were
in force during the previous year. The amendment is given retroactive operation and applies to assessments oending or closed.
The question for consideration before this Court was whether
this Amending Act would apply to the present assessment.
He!d: (i) 'l'he law found incorporated in s. 31 by Amending
Act III of 1963 would apply to the present case. This Court in
giving its opinion on the question in the light of the amending
Act is seeking to apply a legislative provision which was, by
express enactment, in force at the time when the liability arose,
for s. 31 enacted by Act III of 1963 is to be deemed to have been
in operation at all material times in supersession of the previous
law declared by this Court in Modi Sugar Mills Ltd.'s case. This
Court is, therefore, not seeking to apply any Jaw to the question
posed before the High Court which was not in force on the date
of the transaction which is the subject-matter of the reference
Modi Food Products Ltd. v. Commissioner of S_ales-tax, U.P.
A.I.R. 1956 All. 35 and Commissioner of Sales-tax, U.P. v. Modi
Sugar Mills Ltd., [1961) 2. S.C.R. 189 explained.
1964
March 2()
384
SUPREME COURT REPORTS
[1964]
1964
(ii) When the question has been referred to the High Court
-OvmmissWnrr of and in the meantime the law has been amended with retroactive
Sal•·• Tnx, U.P.
operation, it would be the duty of the High Court to apply the
,..
law so amended as if it applies. By taking notice of the law
llijli Collon ~N/,, which has been substituted for the original provision, the High
llriJhra.9
Court is giving effect to tr.e legislative intent and docs no more
than what must be deemed to be necessarily implicit in the
question referred by the Tribunal, provided the question is
couched in terms of sufficient amplitude to cover an enquiry into
the question in the light of the amended law, and the enquiry
does not necessitate investigation of fresh facts.
MI s. Chatturam Horilram Ltd. v. Commissioner of Income·
tax, Bihar and Orissa, {1955] 2 S.C.R. 290 and M / s. Rampur
Distillery Chemical Works Ltd. v. Commissioner of Income-tax,
U.P., I.T. Reference No. 362/58 dt. 17-1-64, distinguished.
CIVIL APPELLATE JURISPlCTION: Civil Appeal No. 546 nf
1962. Appeal by special leave from the judgment and decree
dated December 17, 1958 of the Allahabad. High Court in
Misc. Case No. 152 of 1952.
C. B. Agarwala and C. P. Lal, for the appellant
S. K. Kapur, S. K. Mehta and K. L. Mehta, for the respondent.
March 20, 1964. The Judgment of the Court was delivered by
·
SHAH, J -Bijli Cotton Mills-respondent in tbis appealis a manufacturer of cotton yarn and is registered as a dealer
under the U.P. Sales Tax Act (15 of 1948). Under the U.P.
Sales Tax Act 05 of 1948) which came into force on April 1,
1948, sales-tax became payable on sales of diverse commodities including cotton yarn at a uniform rate of three pies in a
rupee. By Act 25 of 1948, s: 3-A was incorporated in Act 15 of
I 948 conferring upon the Provincial Goverhln~nt power to
declare by notification that the proceeds of safe.. of any goods
or class of goods shall not be included in the turnover of any
dealer except at such single point in the serie's of sales by
successive dealers as the State Government may specify. Bys. 7
as amended by Act 25 of 1948. a dealer had the option to submit his return on the basis of the turnover of the mies in the
previous year or on the basis of turnover of the sales in the
current year. The respondent company opted to be assessed on
the basis of the turnover of the previous year ending March 31,
1948.
In exercise of the power under s. 3-A of the Act the
Government of U.P. issued a notification declaring that with
effect from June 9, I 948, the proceeds of goods entered in
column 2 of the schedule to the said notification (which included cotton yarn) shall not be included in the turnover of any
dealer except at the point in the series of sales by successive
7 S.C.R.
SUPREME COURT REPORTS
385
dealers, and that with effect from June 9, 1949, the rate of tax
1964
in respect of the turnover of the aforesaid goods shall be as Oommi..W..r of
set out in the schedule. As a result of the notification the sale saie. Tan:, U.P.
of cotton yam became taxable at a single point i.e. at a point BT 0;;,, M"ll
<Jf sale by the importer if the goods were imported from outside
IJ ' Balh~aa
1
'•
Uttar Pradesh and at a point of sale by the manufacturer,
if manufactured in Uttar Pradesh, and the rate of tax in respect 'of cotton yarn was fixed, since the date of notification,
at six pies per rupee.
The Sales-tax Officer, Hathras in assessing the respondent
company to sales-tax for the assessment year 1948-49 held that
because of the notification issued by the Government, the rate
of three pies per rupee in respect of sales of cotton yarn was to
.apply in the year of assessment for the first 69 days and for the
remaining part of the year the rate of six pies per rupee was to
.apply, and on that account notwithstanding that the assessee
had opted under s. 7 to be assessed on the basis of the turnover
of the previous year, the rate of three pies was applicable to
the assessable turnover for the first 69 days and for the rest of
the year the rate applicable was six pies per rupee. This order
was modified in appeal by the Judge (Appeals) Sales Tax,
Meerut, who directed assessment of tax on the turnover at a
uniform rate of thret' pies per rupee. But the order of the appellate court was reversed by the Judge (Revisions) Sales Tax,
U.P. who restored the order of the Sales-tax Officer. The Judge
(Revisions) Sales Tax at the instance of the respondent company then referred to the High Coutt of Judicature at Allahabad the following question:
"Wht'ther the assessees who had elected the previous
year are liable to pay tax in the assessment year
I 948-49 according to the rates prevailing during
the year", and
the High Court following its judgment in Modi Food Products
Ltd. v. Com1»issioner of Sales Tax, U.P.(') answered the question as follows:
"all sales of the assessee during the previous year which
corresponded with the calendar year 1947 have to
be taxed at the fla.t rate of 3 pies per rupee when
making the assessment for the assessment year
1948-49".
.
With special leave, the Commissioner of Sales Tax, U.P. has
.appealed to this Court against the order of the High Court.
. It may _be observed that the judgment of the Allahabad
Htgh Court m Modi Food Products Ltd.'s case(') was confirmed by this Court: Commissioner of Sales Tax, U.P. v. The
(') AI.R. 1956 All. 35.
L,P(D)ISCI-13
SluJh, J.
1.9C4
Cor.;missioner of
Bales 'l'nx. c:.P.
v.
Bijli Cotton 11!ills,
Jlaflira..~
S!iah,J.
38(i
SUPREME COURT REPORTS
[19G4J
Modi Sugar Mills Ltd.(') But the Legislature of the State of
Uttar Pradesh has. since that judgment was pronounced. enacted validating legislation by Act lII of 1963 which has provided by s. 7 of the Amending Act that:
"After section 30 of the Principal Act. the following
shall be added and be deemed. to have been added
with effect from the first day of April, 1948. as new
section 31 :
'31. (l) Where any dealer has. in accordance with the
provisions of section 7, as it stood prier to its
amendment by section 7 of U.P. Act XIX of 1956.
opted to be assessed to tax on the basis of his turnover of the previous year, he shall be assessed to
tax at such rates as arc prevalent during the year
for which the assessment is being made, and if the
rates of tax on any goods or class of goods are
altered during such assessment year, the dealer, in
respect of the turnover of such goods, shall be
liable to pay tax at the altered rates, as if the altered rates were in force during the previous'year also
proportionately for the same number of days as
they are in force during the assessment year.
(2) Notwithstanding any judgment, decree or order of
any court, all assessments or orders made. actions
or prcceedings taken, directions issued. jurisdictions exercised or tax levied or collected by any
officer or authority purporting to act under the
provisions of sub-section (I) of section 7. as it stood
prior to its amendment by section 7 of U .P. Act
XIX of 1956, shall be deemed to be good and valid
in law as if such assessments, orders, actions, proceedings, directions, jurisdictions and tax have
been duly made, taken, issued, exercised, levied or
collected. as the case may be, under or in accordance with the said provisions of this Act as amended by the Uttar Pradesh Bikri Kar (Sanshodhan)
Adhiniyam, 1962 and as if the amendment so
made had been in force on all material dates.
Explanation-For the purpose of this section the expression "previous year" shall have the meaning
assigned to it in sub-clause (ii) of clause (j) of section 2 of this Act, as it stood prior to its amendment by section 2 of the U.P. Act XIX of 1956.'"
Section 31 makes sales-tax exigible from an assessee who has
opted to pa.y tax on the turnover of the previous year, as if
the altered rates were in force during the previolls year. The
turnover of the previous year must therefore be broken up.
the new rate of tax being applicable proportionately for the
(') [1961] 2 S.C.R. 189.
• ...
'7 S.C.R.
SUPREME. COURT REPORTS
387
~ame number of days in the previous year as were in force in
the assessment year. The ameodment is retroactive, and applies to assessments pending or closed, as if the validating Act
had be<:n in force at the material date.
This Court had in the Modi Sugar Mills Ltd.'s case(') held
that where the assessee had elected to submit his return on the
turnover of the previous year under s. 7 of Act 15 of 1948 as
amended by Act 25 of 1948 he was liable to be assessed to
sales-tax at the rate in force on the first day of the year of
assessment, because the liability arises on that date, and any
subs..'quent enhancement of the rate by virtue of a notification
under s. 3-A does not alter that liability. The view expressed
by the Court has been modified by express legislation operative
retrospectively. The liability to tax of the turnover of the previous year which is regarded as the fictional turnover of the
year of assessment has to be determined on the basis that the
rates applicable in the year of assessment were fictionally projected on the taxable turnover.
Mr. Kapur appearing on behalf of the respondent company submitted that in answering the question referred by the
Judge <Revisions) this Court was bound to give its opinion in
the light of the Jaw applicable to the transaction as it prevailed
at the date on which the reference was made and not of any
subsequent amendment of the Act. Counsel submits that as the
High Court · exercises an advisory jurisdiction, so does this
Court in appeal against the order of the High Court, and its
advice can only be tendered on the question referred and in
the light of the law as was applicable at the date when the
reference was made. Counsel says that if the Jaw as amended
is to be taken into consideration, in substance this Court would
be answering a question other than the one which was referred
by the Judge cRevisions) Sales Tax. In our view there is no
~bstance in this contention. The qnestion referred to the High
Court posed a problem as to the liability of the respondent
rompany to l><! assessed for the assessment year I 948-49. Two
rival views \\-ere propounded before the Judge (Revisions)
Sales Tax. One was that the rates applicable to the fictional
turnover for the year of assessment were those prevalent in the
year 1948-49 and for the purpose of assessment they had to
be applied to the turnover in the same proportion in which
they. would have applied if the option had not been exercised.
That was the contention of the Sales Tax Department. The
contention of the assessee was that having opted for the turnover of the previous year, the rates applicable to the turnover
would be crystalised on the first day of the year of assessment
and any modification since the commencement of the year in
the rates would be inapplicable. This Court in the Modi Sugar
(') [1961] :!, S.c.R. 189.
1964
Comni·issioner of
Salu Tax, U.P.
v.
Biili Collon ~llilla,
Hathras
Shah,J.
1964
Commiuioner of
Bal" Tax, u.J!.
v.
Bijli Cott.on Mills,
Batlaras
Bliak, J.
388
SUPREME COURT REPORTS
[1964}
Miils Ltd.'s case(') accepted the contention raised by the
assessee. But for the amendment, the question which was posed
by the Judge (Revisions) Sales Tax would have to be answered
as it was answered by the High Court. The Legislature has.
however, am.ended the Act and has declared that notwithstanding the option exercised by the assessee the tax would have to
be computed in the light of the rates prevailing in 1948-49 as
if they were projected upon the turnover of the previous year.
The Legislature has expressly stated that this rule will prevail
as if it was in force during the assessment year and all assessments will be made in the light of this amended rule. In answering the question which was submitted by the Judge (Revisions) Sales Tax, therefore, the law enacted by the Legislature
is the law found incorporated in s. 31 by Amending Act Ill of
1963. This Court in giving its opinion on the question in the
light of the amending Act is seeking to apply a legislative provision which was, by express enactment, in force at the time
when the liability arose, fer s. 31 enacted by Act III of 1963
is to be deemed to ha.ve been in operation at all material times
in supersession of the previous rule declared by this Court.
This Court is, therefore, not seeking to apply any law to the
question posed before the High Court which was not in force
on the date of the transaction which is the subject-matter of
the reference.
The following observation made by Jagannadhadas J., in
Messrs Chatturam Horilram Ltd. v. Commissioner of lncometax, Bihar and Orissa(') on which reliance was placed by counsel for the respondent company:
"The High Court's jurisdiction was only to answer the
particular question that was referred to it by the
Income-tax Appellate Tribunal and it is extremely
doubtful whether they could ha.ve taken notice of
a subsequent legislation and answered a different
question.",
do~s not suggest a different rule. In Messrs Chatturam Hori/-
ram Ltd.'s case(') a previous assessment to income-tax of the
assessee fell through because the Indian Finance Act of 1939
was not in force iii Chota Nagpur area where the assessee was
carrying on business during the relevant assessment .year.
Thereafter Bihar Regulation IV of 1942 was promulgated by
•
the Governor of Bihar with the assent of the Governor-General
and thereby the Indian Finance Act of 1939 was brought into
force in Chota Nagpur retrospectively as from March 30, 1939.
On February 8. 1944, the Income-tax Officer issued a fresh
notice under s. 34 of the Indian Income-tax Act, 1922. which
resulted in the assessment of the appellant to income-tax. and
the question which fell to be determined was whether the
(') [1961) 2 S.C.R. 189.
(') [1955] 2 S.C.R. 290.
I
7 S.C.R.
SUPREME COURT REPORTS
389
notice was properly issued under s. 34 of the Act. It was argued
1961
that when the High Court answered the earlier reference which Commi&ioner o/
negatived the claim of the Revenue to assess the assessee, Bihar Sal .. Ttn. U.P.
Regulation IV of 1942 had in fact been enacted, and if the Bijli cart... Mill<,
High Court had applied that Regulation the result would have
Hatkra•
been different, and in meeting that argument the Court observ-
-
ed that it was doubtful if the High Court had jurisdiction to
Shah, J.
take into consideration the 'ubsequent legislation for answering a question other than the one which was actually raised.
The doubt expressed was therefore in respect of the power of
the Court to decide a question other than the question which
was actually referred and not in respect of the power and
indeed the duty of the High Court to apply to the question
referred the law enacted with retroactive operation.
In support of his contention Mr. Kapur relied upon the
observation of Desai, C.J ., in MI s Rampur Distillery Chemical
Works Ltd. v. The Commissioner of Income-tax, U.P.(') to the
following effect:
"The argument was that though the High Court has to
answer the question referred to it with reference
to the law in force in 1957 (when the Tribunal disposed of the appeal), what that la,w was has to be
discovered today with reference to the law existing
today. What was the law in 1957 on the basis of
which the Tribunal disposed of the appeal has
certainly to be decided by this court today but
what has to be decided is the la.w existing in 1957
and not deemed to exist in 1957 by virtue of an
amendment in the law made in 1962."
But in that case, in the view of the High Court the amendment
made by the amending statute of 1962 which came into force
after the reference was made by the Income-tax Tribunal had
no retrospective operation, and the question referred by the
Tribunal had to be answered by the High Court in the light
of the relevant law applicable at the date of the transaction.
The observation relied upon has to be read in the context of
the finding of the High Court as to the character of the amending legislation. The observation therefore does not assist the
contention that even in cases where the relevant statute has
been amended with retroactive operation. so as to apply to
the transa.ction which forms the subject-matter of the reference.
and the High Court or this Court is bound in recording its
opinion on the question referred to ignore the amended la;;,,. If
what counsel contends is true. the answer given by the High
Court or by this Court would have no value whatever in cases
where by retroactive amendment of the law, the old law has
(') LT. Reference No. 362 of 1958 decided on Jan. 17, 1964.
1964
Comminim1er of
Balu Tax, U.P.
"·
Bijli 08"'"' Jlilla,
HatMM
Shah, J.
390
SUPREME COURT REPORTS
[1!164]
been superseded and is substituted by a new statutory
provision. Undoubtedly the Tribunal called upon to decide
a taxing dispute must apply the relevant Jaw applicable to
a particular transaction to which the problem relates. and
that Jaw normally is the law applicable as on the date
on which the transaction in dispute has taken place. If
the Jaw which the T n'bunal seeks to apply to the dispute
is amended, so as to make the law applicable to the
transaction in dispute, it would be bound to decide the
question in the light of the Jaw so amended. Similarly when
the question bas been referred to the High Court and in the
meanwhile the Jaw has been amended with retroactive operation. it would be the duty of the High Court to apply the Jaw
so amended if it applies. By taking notice of the Jaw which
has been substituted for the original provision, the High Court
is giving effect to legislative intent and does no more than what
must be deemed to be necessarily implicit in the question
referred by the Tnl>unal, provided the question is conched in
terms of sufficient amplitude to cover an enquiry into the question in the light of the amended Jaw, and the enquiry does not
necessitate investigation of fresh facts. If the question is not
so couched as to invite the High Court to decide the question
in the light of the Jaw as amended O£ if it necessitates in~-esti
gation of facts which have not been investigated, the
High Court may refuse to answer the question. Application of the relevant Jaw to a problem raised by the
reference before the High Court is not normally excluded
merely because at the date when the Tnl>unal decided the
question the relevant Jaw was not O£ could not be brought to
its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts
that in deciding it the High Court is restricted to the application of the Jaw which has been superseded by legislation since
the date when the reference was made by the Tax Tribunal and
is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the
subject-matter of the reference.
On the view taken by us this appeal must be allowed and
the question raised by the Judge <Revisions) Sales Tax must be
answered in the affirmative. Having regard to the circumstances of the case, the parties will bear their own costs both
in this Court and the High Court.
Appeal allowed.