# DEVI DAS GOPAL KRISHNAN & ORS v. STATE OF PUNJAB & ORS

- **Citation:** [1967] 3 S.C.R. 557
- **Court:** Supreme Court of India
- **Decided:** 1966-09-26
- **Case number:** Civil Appeals Nos. 526, 527 and 529 of 1964
- **Bench:** K. SUBBA RAo, J. C. Shah, J. M. Shelat, V. BHARGAVAl, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/devi-das-gopal-krishnan-ors-v-state-of-punjab-ors-4079
- **Pages:** 20

## Headnote

Rate fixation-Delegation-Constitutional and
Statutory necessity, if.
proper guides-East Punjab General Sales Tax Act, 1948 (46 of 1948),.
s. 5.
Severabi/ity-C/Jarging section made subject to section granting power·
to fix rates-Latter declared void-If charging section also void-Effect
of subsequent amendment-East Punjab General Sales Tax Act, 1948 ( 46·
of 1948), ss. 4, 5, 6-Ea!I Punjab General Sales Tax (Second Amendment) Act, 1952 (19 of 1952).
EaSI Punjab General Sales Tax Act, 1948-Leglslative competenct-·
Section 2 Cl. (ft)-'Acqulsitlon' meaning of-Valuable
consideration.
meaning of-Act, if in conflict with Sale of Goods Act, 1930; Central'
Sales Tax Act, 1956, s. 15.
Section 5 of the East Punjab Sales Tax Act, 1948, as originally enact··
ed, conferred on the Government power to levy tax at such rates as the
"Government might fix.
The section was amended by Act 18 of 1952,
with retroSpective effect, fixing the rate of tax at "not exceeding two pice>
in a rupt;e". Section 2(ff) of the Act as amended by Act 13 of 1959.
defines- "Purchase" as the
11acquisition"
ot the gooc1s "tor ~se in the·
manufacture of goods for sale, for cash or deferred
payment or other·
valuable consideration otherwise than under a mortgage hypothecation,
charge or pled~e". The appellants' petition in the High Court c!Wlenging the imposition of rurchase tax for the years 1958-59 and 1959-©
on the purchase of oi seeds, steel scrap and cotton for manufacture of
goods for sale, were dismissed, and they appealed to this Court. Meanwhile. the High Court had considered the validity of the Act in a Sales
Tax Reference and declared s. 5, as it originally stood, void. In this Court
it was contended : (i) since s. 5 as originally enacted, was declared void,
that being the charging section, the entire act was void and the Amending Act of 1952 could not revive an Act which was non est, and (ii)
section 2(ff) was invalid for want of legislative competence.
HELD : (i) Section S as it stood before the amendment was void··
but the section as amended by the Amending Act of 1952 is valid.
'
An Act conferring a power to fix rates of taxation must lay down
clear. le~slative policy or guide-lines in that regard and the doctrine of
~titullon~ and statutory needs would not afford reasonable guide·lines
10 the fixation of such rates. There was nothing in the provisions of
the Act, inc.luding the preamble disclosing any policy or guidance to the
State f~r fixing rates. Section 5 as it stood before the Amendment conf~ed on the Govemment an uncontrolled power in the matter of fixation of rates and was therefore void. [565 G-566 B; 569 FJ
I ,Cedorporatlon of Calcutta v. Liberty Cinema, [1965) 2 S.C.R. 377, exp atn .
State of Madras v, Gannon Dunkerlev & Co. (Madra•) Ltd. [19591
S.C.R. 379, 435, ·vasantlal Maganhhai Sanjanwalti v. State of Bombav
558
SUPREME COURT llJ!PORTS
11967] 3 S.C.R.
{1961) l S.C.R. 341 and The Union of India v. Ml s. Bhona Mal Gul:arl
.Mal, (1960) 2 S.C.R. 627, referred to.
Although s. 5 was void, the entire Act was not void. Section 4 is the
charging section and Section 5 dealt only with the quantification of tax,
· that is, the. charging section was intact and what was struck down was
only the section providing for rates. The fact that s. 4 is made subject to
s. 5 does not render the former void on the principle of non-60Verability,
·because, under the Act, there is a clear distinction between chargeability
and the quantification of tax. Therefore, strikin~ out s. S only made
s. 4 unenforceable. The amendment of s. S bas, 1n sult>tance, the effect
of amending an existing Act. [567 G-H; 568 F-0; 569 B.CJ
B. Shatha Rao v. The Union Territory of Pondicherry,
[1967)
2
S.C.R., distinguished.
B
Kesoram Industries and Cotton Miiis Ltd. v. Commissioner of Wealth
C
:Tax (Central) Calcutta, [1966] 2 S.C.R. 688, referred to.
Conferment of a reasonable area of discretion by a fiscal statute is
·permissible and the discretion to fix the rate between I ~ioe and 2 pi,

## Text

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DEVI DAS GOPAL KRISHNAN & ORS.
v.
STATE OF PUNJAB & ORS.
April IO, 1967
(K. SUBBA RAo, C.J., J. C. SHAH, J. M. SHELAT, V. BHARGAVAl
AND G. K. MITTER, JJ.]
Rate fixation-Delegation-Constitutional and
Statutory necessity, if.
proper guides-East Punjab General Sales Tax Act, 1948 (46 of 1948),.
s. 5.
Severabi/ity-C/Jarging section made subject to section granting power·
to fix rates-Latter declared void-If charging section also void-Effect
of subsequent amendment-East Punjab General Sales Tax Act, 1948 ( 46·
of 1948), ss. 4, 5, 6-Ea!I Punjab General Sales Tax (Second Amendment) Act, 1952 (19 of 1952).
EaSI Punjab General Sales Tax Act, 1948-Leglslative competenct-·
Section 2 Cl. (ft)-'Acqulsitlon' meaning of-Valuable
consideration.
meaning of-Act, if in conflict with Sale of Goods Act, 1930; Central'
Sales Tax Act, 1956, s. 15.
Section 5 of the East Punjab Sales Tax Act, 1948, as originally enact··
ed, conferred on the Government power to levy tax at such rates as the
"Government might fix.
The section was amended by Act 18 of 1952,
with retroSpective effect, fixing the rate of tax at "not exceeding two pice>
in a rupt;e". Section 2(ff) of the Act as amended by Act 13 of 1959.
defines- "Purchase" as the
11acquisition"
ot the gooc1s "tor ~se in the·
manufacture of goods for sale, for cash or deferred
payment or other·
valuable consideration otherwise than under a mortgage hypothecation,
charge or pled~e". The appellants' petition in the High Court c!Wlenging the imposition of rurchase tax for the years 1958-59 and 1959-©
on the purchase of oi seeds, steel scrap and cotton for manufacture of
goods for sale, were dismissed, and they appealed to this Court. Meanwhile. the High Court had considered the validity of the Act in a Sales
Tax Reference and declared s. 5, as it originally stood, void. In this Court
it was contended : (i) since s. 5 as originally enacted, was declared void,
that being the charging section, the entire act was void and the Amending Act of 1952 could not revive an Act which was non est, and (ii)
section 2(ff) was invalid for want of legislative competence.
HELD : (i) Section S as it stood before the amendment was void··
but the section as amended by the Amending Act of 1952 is valid.
'
An Act conferring a power to fix rates of taxation must lay down
clear. le~slative policy or guide-lines in that regard and the doctrine of
~titullon~ and statutory needs would not afford reasonable guide·lines
10 the fixation of such rates. There was nothing in the provisions of
the Act, inc.luding the preamble disclosing any policy or guidance to the
State f~r fixing rates. Section 5 as it stood before the Amendment conf~ed on the Govemment an uncontrolled power in the matter of fixation of rates and was therefore void. [565 G-566 B; 569 FJ
I ,Cedorporatlon of Calcutta v. Liberty Cinema, [1965) 2 S.C.R. 377, exp atn .
State of Madras v, Gannon Dunkerlev & Co. (Madra•) Ltd. [19591
S.C.R. 379, 435, ·vasantlal Maganhhai Sanjanwalti v. State of Bombav
558
SUPREME COURT llJ!PORTS
11967] 3 S.C.R.
{1961) l S.C.R. 341 and The Union of India v. Ml s. Bhona Mal Gul:arl
.Mal, (1960) 2 S.C.R. 627, referred to.
Although s. 5 was void, the entire Act was not void. Section 4 is the
charging section and Section 5 dealt only with the quantification of tax,
· that is, the. charging section was intact and what was struck down was
only the section providing for rates. The fact that s. 4 is made subject to
s. 5 does not render the former void on the principle of non-60Verability,
·because, under the Act, there is a clear distinction between chargeability
and the quantification of tax. Therefore, strikin~ out s. S only made
s. 4 unenforceable. The amendment of s. S bas, 1n sult>tance, the effect
of amending an existing Act. [567 G-H; 568 F-0; 569 B.CJ
B. Shatha Rao v. The Union Territory of Pondicherry,
[1967)
2
S.C.R., distinguished.
B
Kesoram Industries and Cotton Miiis Ltd. v. Commissioner of Wealth
C
:Tax (Central) Calcutta, [1966] 2 S.C.R. 688, referred to.
Conferment of a reasonable area of discretion by a fiscal statute is
·permissible and the discretion to fix the rate between I ~ioe and 2 pi,de
cannot be said to exceed the permissible limits.
[569 0-F)
Khandlge Sham Bhat v. The Agricultural Income Tax Officer, (1963)
. 3 S.C.R. 809, referred to.
D
(ii) Clause (ff) of s. 2 is not void for want of legislative ~
·tence.
Althoujlh the words "acquisition"
and "valuable consideration in
ctbe definition of "purchase" in s. 2(ff) of the Aot indicate, prima facle,
that this definition is wider in scope than the definition "sale", these expressions in the context must be ~ven a restricted meaning. The exg
pression "acquisition" in the definition means only "transfer" and
l;be
expression "valuable consideration" takes colour from the preceding expression "cash or deferred payment" and can only mean some other
monetary payment in the nature of cash or deferred payment. [571 F-0;
572BJ
The State of Madras v. Gannon
Dunkerley cl Co. (Madras) Ltd.
(1959) S.C.R. 379, Sales Tax Officer v. Budh Prakash, A.1.R. 1964 S.C.
p.
459 and George Oakes v. State of Madras, A.I.R. 1962 S.C. 1039, referred to.
Purchue tax, under the Act is I.viable on the purchase of goods and
· not in respect of manufacture of goods and
therefore Is not an eitclae
. duty. The purpose for which goods are p~hased Is only relevant for
fixing the t&Xable event and the taxable event is fixed before the goods
are actually manufactured. [572 H-573 BJ
G
Ml s. Shlnde Bros. v. The Deputy Commissioner, Rakhur, C.As. Nos.
1580-1586 and 1590-1600 of 1955 (decided on 26-9-1966). referred to.
The Act does not enable levy of tax on the same goods at more than
one stage a'1d therefore is not in conflict with s. IS of the Central Sales
Tax Act 1596. Manufacture changes the identity and the good• purchased and the goods sold are not identical and therefore the same goods
H
·are not taxed at two stages. Further, cl. (ff) of 8. 2 of the Act during.
the periods relevant to the present case, in terms, fixed. the stage for
taxation, i.e., the stage of purchase by a dealer for use in the manufacture of goods.
[573 B.C; 576 BJ
DEVI DAS v. PUNJAB (Subba Rao. C.J.)
55&
The fact that the same goods when purcllesed by a
manufacturer
would be taxed but would not be taxed
when purchased by a person
other than a manufacturer would not violate Art. 14 of the Constitution
as s. 2(ff) discl05es a reasonable classification. [S72 C-E]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 526,
527 and 529 of 1964.
Appeals from the judgment and order dated December 15,
1959, of the Punjab High Court in Civil Writ Nos. 827, 826 and
823 of 1959 respectively.
Civil Appeals Nos. 39 to 43 of 1965.
Appeals by special leave from the judgments and orders dated
C
March 30, 1961 of the Punjab High Court in Civil Writ Nos.
467, 473, 476, 474 and 477 of 1960 respectively.
Civil Appeal No. 81 of 1965.
Appeal from the judgment and order dated May 2, 1963 of
the Punjab High Court in Letters Patent Appeal No . .155 of 1963.
o
Civil Appeal No. 540 of 1965.
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Appeal from the judgment and order dated February 18, 1963
of the Punjab High Court in Civil Writ No. 206 of 1962.
M. C. Setalvad, R. K. Garg and S. C. Agarwala, for the appellants (In C.As. No. 526, 527 and 529 of 1964).
R. Ganapathy Iyer and R. N. Sachthey, for the respondents (in
C. A. Nos. 526, 527 and 529 of 1964).
Rameshwar Nath and Mahinder Narain, for the appellants lin
C.As. Nos. 39-43 of 1965).
Hardev Singh and R. N. Sachthey, for the respondents (in
C.As. Nos. 39-43 of 1965).
S. T. Desai and 0. C. Mathur, for the appellants (in C.As.
Nos. 81 and 540 of 1965).
R. Ganapathy Iyer and R. N. Sachthey, for the respondents (in
C.A. No. 81 of 1965).
0. P. Malhotra and R. N. Sachthey, for the respondents (in
C.A. No. 540 of 1965).
The Judgment of the Court was delivered by
Sobba Rao, C.J. The decision on these appeals depends upon
the interpretation of the relevant provisions of the Punjab General
Sales Tax Act, 1948 (Punjab Act 46 of 1948), as amended
by Punjab Act 7 of 1958, relating to three categories of goods
namely, oil-seeds, iron and cotton.
'
The facts may be briefly stated.
560
SUPlU!MB COURT lU!PORTS
[1967] 3 S.C.R
The asscssees in Civil Appeals Nos. 526, 527 and 529 of 1964
cany on business· at Moga in Punjab and each owns an oil-mill.
They purchase oil-seeds and, after crushing the same in their oil
mills, sell the oil and the residual oil-cake. They are registered
dealers under tbe Act. The Amending Act imposed a purchasetax of 2 % on the purchase of oil-seeds "for the use in the manufacture of goods for sale." .This was in addition to the sales-tax
leviable on the sales of oil and oil-cake. On June 23, 1959, the
Excise and Taxation Officer, Ferozepore, the 3rd respondent in
the said appeals, issued notices to the 3 appellants--assessees to
the effect that they did not submit their return5' for the year ending
1958-59 and failed to pay purchase-tax in respect thereof and
asked them to show cause why they should not be prosecuted for
the said default. The appellants filed 3 petitions under Art. 226
of the Constitution in the High Court of Punjab questioning the
validity of the relevant provisions of the Act and for appropriate
reliefs. A Division Bench of· the High Court heard the petitions,
along with other connected petitions, and dismissed the petitions
of the appellants so far as they related to purchase-tax on oil-seeds.
Hence the appeals.
Civil Appeals Nos. 39 to 43 of 1965 relate to purchase-tax on
iron. The appellants carry on business in rolling steel at Gobindgarh. They purchase steel scrap and steel ingots and convert them
into rolled steel sections. Under the Act, the assessing authority
imposed purchase-tax at the rate of 2 % on the purchase of steel
scrap and steel ingots made by them during the period April l,
19 5 8 to March 31, 19 5 9 for making rolled steel section and selling
the same.
The appellants filed petitions under Art.· 22ll of the
Constitution in the High Court for appropriate writs for quashing
the orders of the assessing authorities and for prohibiting them
from levying purchase-tax on the goods purchased and for refund
of the tax illegally collected from them. A Division Bench of the
High Court dismissed the petitions. Hence the appeals.
Appeals Nos. 81 of 1965 and 540 of 1965 relate to purchasetax on cotton.
The appellants in Civil Appeal No. 81 of 1965
are the trustees of Birla Education Trust. They own a cotton and
te:ttile mill, Bhiwani. They purchase cotton from various dealers
in Punjab and outside for the manufacture of yarn and cloth. By
an order dated March 11, 1962, the District Taxation Office~
Hissar, imposed purchase-tax on the appellants in respect of the
cotton purchased by them for the assessment years 1958-59 and
1959-60. The appellant in Civil Appeal No. 540 of 1965 is a
limited company carrying on the business of producing and selling
yarn.
For the purpose of its business it acquires cotton from
commission agents. It is a registered dealer under the Act. The
Excise and Taxation Officer, Hissar, by his order dated November
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DEVI DAS v. PUNJAB (Subba Rao, C.J.)
56!
29, 1961, assessed the appellant to purchase-tax for the assessment
year 1958-59 in respect of the cotton purchased by it and so too
on Janua!J'. 27, 1962, he had taken proceedings for making assess·
ment to purchase-tax for the assessment year 1959-60 in respect of
the same commodity.
The appellants in both the appeals filed
petitions under Art. 226 of the Constitution in the High Court
questioning the validity of the said orders. The said writ petitions
were dismissed by a Division Bench of the High Court. Hence the
appeals.
We shall at first take the points raised which are common to
all the appeals and then proceed to consider 1he points peculiar
to some of the appeals.
Mr. M. C. Setalvad, learned counsel appearing for the appel·
!ants in the batch of appeals relating to tax on purchase of oil·
seeds, raised before us the following points which are common
to other appeals : ( 1 ). Section 5 of the East Punjab General Sales
Tax, Act, 1948, was held to be void on the ground that it conferred
essentially legislative power on the provincial Government and,
therefore, the said section was still-born and that, as the said section was the charging section, the entire Act was void, with the
result Act 19 of 1952, which amended s. 5 with retrospective
effect could not breathe a new life into the said Act. A void Act
was non.est and, therefore, could not be brought into force by an
amending Act.
(2) Clause (ff) of section 2 introduced by Act
7 of 1958 defining "purchase", subject to the conditions mentioned
therein as a taxing event was ultra vires the State Legislature inasmuch as the transaction de.fined therein was not a "'sale" within
the meaning of that expression in entry 52 of List II of the 7th
Schedule to the Constitution and was in fact an "excise" duty inasmuch as it wa·s imposed on the production of oil in the garb of
purchase tax.
(3) The said amendment was also bad in that it
made an unreasonable discrimination in the matter of taxation between the same classes of goods based on the character of the purchaser. If the goods were purchased by a manufacturer, they
were liable to purchase tax; and if the same goods were purchased
by an ordinary dealer, they were not liable to the said tax.
(4)
The amended provision, section 2(ff), was also void because it
contravened ss. 14 and 15 of the Central Sales-tax Act, 1956,
whereunder sales-tax was prohibited to be imposed on the declared
goods at more than one stage, whereas under the Act it could be
imposed both at the purchase point and at the sale point of the
transactions entered into by the manufacturer.
(5) Purchase-tax
was not leviable on oil-seeds, as the ·sessees did not manufacture
oil. out of the seeds but only produced the oil.
We shall now proceed to consider the points seriarim.
The
provisions relevant to the first two points read thus :
L?Sup . .CI/67-6
562
SUP.llBMB COUll.T 11.BPOl!.TS
[1967) 3 S.C.R.
East Punjab General Sales Tax Act (46 of 1948)
II.
Section 5. Subject to the provisions of this Act,
there shall be levied on the taxable turnover every year
of a dealer a tax at su.ch rates as the Provincial Government may by notification direct.
East Punjab General Sales Tax (Second Amendment) Act, 1952
B
(Act No. 19 of 1952).
Section 2. Amendment of section 5 of Punjab Act
46 of 1948:
In sub-section (1) of section 5 of the East Punjab
General Sales Tax Act, 1948, after the word "rates" the
following words shall be inserted and shall be deemed
always to have been so inserted, namely, 'not exceeding
two pice in a rupee'.
The High Court of Punjab held that s. 5 of the Act was void as
it gave an unlimited power to the executive to levy sales-tax at a
rate which it thought fit. But it held that the amendment of section 5 by the Punjab Act 19 of 1952 cured the defect in the said
Act and had the effect of giving a new life to it.
The first question, therefore, is whether section 5 of the East
Punjab General Sales Tax Act, 1948 ( 46 of 1948 )., as it originally
stood, was void, and the second question is, if the said section was
void, whether the amendment could give life to it.
The law on the subject is fairly well settled, though difficulties
are met in its application to each case. In Corporation of Calcutta,
v. Liberty Cinema(') on which Mr. Ganapati Iyer relied relates
to a levy imposed on cinema houses under the Calcutta Municipal
Act (33 of 1951). There, the majority held that the levy therein
was a tax, that the fixing of a rate of tax was not of the essence of
legislative power, that the fixing of rates might be left to a nonlegislative body and that when it was so left to such a body, the
Legislature must provide guidance for such fixation.
The majority held in that case that such a guidance was found in the monetary needs of the Municipality for discharging !he functions entrusted to it under thei Act. Sarkar J., speaking for the majority
.Mid thus:
"It (the Municipal Corporation) has to perform various statutory functions.
It is often given power to
decide when and in what manner the functions are to be
performed.
For all this it needs money and its needs
will vary from time to time, with the prevailing exigencies.
Its power to collect tax, however, is necessarily
(I} [IY~l) 2 S.C.R. 477-:-
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DBVI DAS v. PUNJAB (Subba Rao, C.J.)
563
limited by the expenses required to discharge those functions. It has, therefore, where rates have not been spe·
citied in the statute, to fix such rates as may be necessary
to meet its needs. That, we think, would be sufficient
guidance to make the exercise of its power to fix the
rates valid."
If this decision is an authority for the position that the Legislature
can delegate its power to a stat~t~ry authority to levy. taxes and
fix the rates in regard thereto, 1t 1s equally an authority for the
position that the said statute to be valid must give a ~uidance to
the said authority for fixing the said rates and that guidance can·
not be judged by sterotyped rules but. would de~n? up0n t~e
provisions of a particular Act. To that extent this 1udgment JS
binding on us. But we cannot go further and hold, as the learned
counsel for the respondents asked us to do, that whenever a statute
defines the purpose or purposes for which a statutory authority is
constituted and empowers it to levy a tax that statute necessarily
contains a guidance to fix the rates : it depends upon the' provisions
of each statute.
Learned counsel for the State argued that under Art. 162 of
the Constitution the executive power of the State shall extend to
matters with respect to which the Legislature of a State has power
to make laws : that is to say, the executive power of a State extends to matters mentioned in List II of the Seventh Schedule to
the Constitution, that under Art. 266 (I) of the Constitution all the
taxes collected will go to the Consolidated Funds of the State, that
the State has an unlimited power to raise funds by taxation to discharge its vast constitutional duties and that necessarily the amount
of tax required would depend upon its needs which can only be
known to it. In the said circumstances, the argument proceeds,.
the doctrine of constitutional and statutory needs would afford
reasonable guidelines for the Government to fix the rate and that
the principle laid down by this Court in the aforesaid decision
~ould equally apply to this case. If this argument be accepted,
1t would mean that every statute conferring a naked power on
the ~overnment to impose taxes would be good, for in every case·
the discharge of the constitutional duties by the Government would
be deemed to be a sufficient guide for fixing the rate. We cannot
ac~ept this ~rgument for three reasons, namely, (!) the decision of
this Court m Calcutta Corporation v. Liberty Cinema(') should
be coi;ifine~ only to the provisio!15 of the Calcutta Municipal Act
wherein this Court found a guidance; (2) the provisions of the
Sales :rax Act, including the pr~amble, do not disclose any policy
or guidance to the Stat~for fixing the rates: and (3) the general'
(I) [1965J 2 S,C,R, 477,
564
SUPRBMB COURT 11.BPORTS
[1967] 3 s.c.a.
constitutional power to impose taxes has no relevance for dis·
A
covering a statutory policy under a particular Act.
Nor does the decision of this Court in The State of Madras v.
Gannon Dunkerley & Co., (Madras) Ltd.(') lend support to the
argument so widely advanced by the learned counsel. That case
has nothing to do with the fixation of rates of taxes. There section
6(1) of the Madras General Sales Tax Act, 1939, as amended
B
by Madras Act 25 of 194 7, provided that no tax will be payable
on any sale of goods specified in the schedule to it. Section 6(2)
of that Act authorised the State Government to amend the schedule
by notification.
The amendment of the Schedule by the State
Government was challenged on the ground that section 6(2) was
invalid as it was a delegation of the essential power of legislation c
of the State Government.
Venkatarama Aiyar, J., speaking for
the Court, in rejecting that contention, observed thus :
"Now, the authorities. are clear that it is not uncon·
stitutional for the legislature to leave it to the executive to
determine details relating to the working of taxation Jaws,
such as the selection of persons on whom the tax is to
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be laid, the rates at which it is to be charged in respect
of different classes of goods, and the like."
It is not necessary to scrutinize the correctness of this statement,
having regard to the decisions relied upon, for t1'Js Court in Corporation of Calcutta v. Liberty Cinema( 2 ) accepted it, but made
it clear that such a power to fix the rates must be supported by
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some reasonable guidance given under the Act whereunder the
said power was conferred.
Nor the observations of Rajagopala
Ayyangar, J., in the said decision speaking for the minority, lend
support to the contentions of the respondents.
The decision in Vasantlal Maganbhai Sanjanwala v. The State
of Bombay(') raised the question whether section 6(2) of the
F
Bombay Tenancy and Agricultural Lands Act, ·1948 (Bom. 67
of 1948), which enabled the Government to fix the rent payable
by a tenant within the maximum limits prescribed thereunder, was
valid. When it was argued that it was bad because of excessive
delegation, this Court sustained it on the basis of a legislative
policy disclosed by section 12(3) of the Act.
G
In The Union of India v. Messrs. Bhana Mal Gulzari Mal(4 )
this Court rejected the contention that caluse l lB of Iron and Steel
(Control of Production & Distribution) Order, 1941, whereunder
the Central Government· was authorised to issue notification fixing
the maximum price of steel, was void on the ground of excessive
delegation, as it found that the said clause only further canalized
n
the policy disclosed in ss. 3 and 4 of the Act.
(1\ {1959] S.C.R. 379, 435.
(2l [1965] 2 S.C.R. 477.
(3) [1961] l S.C.R. 341.
(4) [1960] 2 S.C.R. 627.
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DEVI DAS v. PUNJAB (Subba Rao, C.J.)
565
Further citation is unnecessary, for the principle of excessive
delegation is well settled and the cases are only illustratio~s of the
application of the said principle. The law on the subject may
briefly be stated thus :
"The Constitution confers a power and imposes a
duty on the legislature to make laws. The essenti~l lejli·
slative function is the determination of the leg1slat1ve
policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another.
But in view of the multifarious activities of a
welfare State, it cannot presumably work out al~ the. details to suit the varying aspects of a complex situation.
It must necessarily delegate the working out of details to
the executive or any other agency. But there is a danger
inherent in such a process of delegation. An overburdened legislature or one controlled by a powerful executive may unduly overstep the limits of delegation. It may
not lay down any policy at all; it may declare its policy
in vague and general terms; it may not set down any
standard for the guidance of the executive; it may confer
an arbitrary power on the executive to change or modify
the policy laid down by it without reserving for itself any
control over subordinate legislation.
This self effacement of legislative power in favour of another agency
either in whole or in part is beyond the permissible
limits of delegation. It is for a Court to hold on a fair,
generous and liberal construction of an impugned statute
whether the legislature exceeded such limits.
But the
said liberal construction should not be carried by the
Courts to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary
power conferred on executive authorities. It is the duty
of the Court to strike down without any hesitation any
arbitrary
power conferred on the executive
by the
legislature.
Sec Vasantlal Maganbhai Sanjamva/a v. The State of /Jombay(')
at pp. 356-357.
.Under. section 5 of the Punjab General Sales Tax Act, 1948,
as it ongmally stood, an uncontrolled power was conferred on
the provincial Government to levy every year on the taxable turnoyer of a dealer a tax at. such rates as .the said Government might
direct Under that sect10~ the Legislature practically effaced
itself 1~ the matter of fixat10n of rates and it did not give any guidance either under that section or under any other provisions of
the Act-no other prov1s1on was brought to our notice.
The
(I) [1961) J S.C.R. 341.
566
SUPRBMB COU!lT REPORTS
[1967] 3 S.C.R.
argument of the learned counsel that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if
accepted, it would destroy the doctrine of excessive delegation. It
would also sanction conferment of power by Legislature on the
executive Government witho11t laying down any guide-Jines in the
Act.
The minimum we expect of the Legislature is to lay down
in the Act conferring such a power of fixation of rates clear legislative policy or guide-lines in that regard. As the Act did not
prescribe any such policy, it must be held that section 5 of the
said Act, as it stood before the amendment, was void.
The next step in the argument of Mr. M. C. Setalvad was that
sections 4, 5 and 6 of the Punjab Central Sales Tax Act, 1948,
together formed a group of charging sections and they were so
integrally connected with each other that if section 5 was void,
sections 4 and 6 also fell with it, as 911e was not severable from
the other. As the charging sections were the crux of the Act,
the argument proceeded, the whole Act was void and therefore
the Act amending section 5 could not revive the Act which was
still-born.
The relevant provisions may now be read.
Section 4 (1). Subject to the provisions of sections 5
and 6, every ,dealer except one dealing exclusively in
goods declared tax-free under section 6 whose grossturnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum
shall be liable to pay tax under this Act on all sales effected after coming into force of this Act.
Section 5 has already been extracted.
Section 6 ( 1). No tax shall be payable on the sale of
goods specified in the first column of Schedule B subject to the conditions and exceptions, if any, set out in the
corresponding entry in the second column thereof and
no dealer shall charge sales tax on the sale of goods which
are declared tax-free from time to time under this section.
B
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It will be seen that section 4 is a charging section, that section
5 provides for fixation of rates and that section 6 prescribes for
exemptions. Section 4 is made subject to sections 5 and 6. If
section 5 is struck out, will section 4 become void ? This will
depend upon two questions, namely, (i) whether section 5 is a
charging section ? and (ii) even if section 4 alone is the charging
H
section, as it is made subject to section 5 and as the section subject
to which it is made was still-born, whether section 4, on the application of the doctrine of severance, becomes void.
DEVI DAS v. PUNJAB (Subba Rao, C.I.)
567
A
In the context of Income-tax Act it was held by this Court in
Kesoram Industries and Cotton Mills Ltd. v. Commissioner of
Wealth-tax, (Central), Calcutta(') that tho charging section for
the purpose of income-tax was section 3 of the Indian Income-tax
Act, 1922, and the annual Finance Acts only gave the rate for
quantifying the tax. Section 3 of the said Income-tax Act read :
B
"Where any Central Act enacts that income-tax shall
be charged for any year at any rate or rates, tax at that
rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act
in respect of the total income of the previous year of
every individual, Hindu undivided family, company and
C
local authority, and of every firm and other association of
persons or the partners of the firm or the members of
the association individually."
D
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Section 2 of the Finance (No. 2) Act, 1957, read:
"(1) Subject to the provisions of sub-sections (2),
(3), (4) a.nd (S) for the year beginning on tho 1st day of
April, 1957,-
(a) income-tax shall be charged at tho rates specified
in Part I of the First Schedule, and, in tho cases to which
Paragraphs A, B. and C of that Part apply, shall be
increased! by a surcharge for purposes of tlie Union and
a special surcharge on unearned income, calculated in
either case in .the manner provided therein;"
It was argued that the liabiUty to tax did not arise till the Finance
Act was made and the tax quantified. Dealing with this question,
this Court by majority observed :
"A liability to pay income-tax. is a present liability
though it becomes payable after it is quantified in accordance with ascertainable data."
The onlr .di~erence between Income-tax Act and the present Act is
that while m the Income-tax Act seetion 3 thereof does not expressly make the liability subject to the provisions of the Finance
Act which fixes the rate, under the Sales-tax Act in question section 4 thereof in terms is made subject to section S. But under both
the Acts there is a clear distinction between chargeability and the
quantification of tax. While it is true that the tax cannot be realised without it being quantified, the non-quantification of the liability will not destroy the liability under the charging section. The
liability has to be distinguished from its enforceability. It cannot
be said, and indeed ii is not said, that the Income-tax Act has no
legal existence till the Finance Act is made, though till the Finance
(I) [1966] 2 S.C.R. 688, 7,8.
568
SUPREME COURT REPORTS
[l 967) 3 S.C.R.
Act is made it cannot be enforced. But reliance is placed on section 67B of the Income-tax Act in support of the contention that
its existence in the statute book keeps the Act alive, for the rate
prescribed by the previous Finance Act is applicable till the new
Finance Act is passed.
But it will be noticed that: the Court's
decision was not based on the existence of the said provision but on
that of the charging section itself.
It follows that striking out
section 5 does not make section 4 void, though till an appropriate
section is inserted it remains unenforceable. The decision of this
Court in B. Shama Rao v. The Union Territory of Pondicherry(')
is clearly distinguishable.
There, sub-section (1) of section 2 of
the Pondicherry General Sales Tax Act, 10 of 1965, provided
that :
"The Madras General Sales Tax Act, 1959 (No. 1
of 1959) (hereinafter referred to as the Act) as in force
in the State of Madras immediately before the commencement of this Act shall extend to and come into force
in the Union of Territory of Pondicherry subject to the
following modifications and adaptations, ...... "
Section 1 (2) of the said Act provided that the Act would come into
force on such date as the Government by notification may appoint.
The effect of the section was that the Madras Act as it stood on
the date of the notification issued would be in force in the Union
Territory of Pondicherry. Indeed it turned out that the Madras
Act was amended before the said 'notification. This Court held
that there,was a total surrender in the matter of sales-tax legislation by the- Pondkherry Assembly in favour of the Madras legislature and for that reason the said sections were void or still-born.
It was argued that the Act could not be said to be still-born as
it contained certain provisions independent of the Madras Act,
viz., a section which provided for the appellate tribunal and the
schedule. But it was pointed out that the core of th(l taxing statute
was in the charging section and that the remaining sections had
no independent existence.
In the present case the charging section was intact and what was struck out was only the section providing for rates. It cannot, therefore, be said that when section 5
was struck out, section 4 or other sections fell with it.
It was then contended that even if the whole Act was not stillborn, section 5 was non est, that the amending Act did not insert a
new section 5 but purported to amend the earlier section 5 which
was not in existence.
Now under the East Punjab General Sales
Tax (Second Amendment) Act, 1952 (Act No. 19 of l 952) section
A
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5 of the East Punjab General Sales Tax Act, l 948 was amended.
H
Section 2 of the said amending Act says :
(\) [1967\2S.C.R.65•.
A
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DEVI DAS v. PUNJAB (Subba Rao, C.J.)
569
"In sub-section (1) of Section 5 of the East Punjab
General Sales Tax Act, 1948, after the word 'rates'
the
fo11owing words shall be inserted and shall
be
deemed always to have been so inserted, namely :-'not
exceeding two pice in a rupee'."
No doubt in terms the section inserts the words "not exceeding two
pice in a rupee" in section 5. If section 5 is inserted in the Act
by the Amending Act with the said words added, there cannot possibly be any objection, for that would be an amendment of an
existing Act.
But in substance the amendment brings about the
same effect.
The words "shall be deemed always to have been
so inserted" indicate that in substance section 5, as amended, is
inserted in the Act with retrospective effect.
Even so it was contended that section 5, as amended, only
gave the maximum rate and did not disclose any policy giving
guidance to the executive for fixing any rate within that maximum.
Here we are concerned with sales-tax. If the Act had said "2 pice
in a rupee" it would be manifest that it was a clear guidance. But
as the Act applies to sales or purchases of different commodities
it had become necessary to give some discretion to the Government
in fixing the rate.
Conferment of reasonable area of discretion
by a fiscal statute has been approved by this Court in more than
one decision : see Khandige Sham Bhat v. The Agricultural
Income-tax Officer('). At the same time a larger statutory discretion placing a wide gap between the minimum and the maximum
rates and thus enabling the Government to fix an arbitrary rate
n:ay n?t be sustained. In the ultimate analysis, the permissible
d1screl!on depends upon the facts of each case. The discretion to
fix t~e :ate betwe~n 1 pice and 2 pice in a rupee is so insignificant
that 1t 1s not possible to hold that it exceeds the permissible limits.
It follows that section 5 of the Act as amended is valid.
The next argument is that section 2(ff)' inserted in the Punjab
General Sales Tax Act, 1948, by the East Punjab General Sales
Tax (Ame~dment) Act, 1958 (Act No. 7 of 1958) and amended
by Amendmg Act 13 of 1959 is void.
The said clause (ff) as
amended by Act 13 of 1959 reads :
·
",'Purchase', with ·all its grammatical or cognate express10ns, means the acquisition of goods specified in
Schedule 'C' for use in the manufacture of goods for sale>
f?r cash or ~eferred payment or other valuable considerat10n otherwise than under a mortgage, hypothecation
charge or pledge."
'
!he first l~nb of the argument is that the definition of "purchase"
}s -:pore .comprehensive than the definition of "sale" under the
~n
Sale of G~ods_ Act and, therefore, the State Legislature was
(l) [1963] J S.C.R. 809. -
570
SUPREME COURT REPORTS
rt 967J 3 s.c.R.
incompetent to make a law under entry "sale or purchase" in List
A
II of the 7th Schedule to the Constitution. The constitutional position is well settled. Entry 54 of List II of the 7th Schedule to the
Constitution reads :
"Tax:es on the sale or purchase of goods other than
newspapers, subject to the provisions of entry 92A of
List I."
B
ln The State of Madras v. Gannon Dunkerley & Co. (Madras)
Ltd.(') Venkatarama Aiyer, J., speaking for the Court, observed:
"Thus, according to the law both of England and
India, in order to constitute a sale it is necessary that
there should be an agreement between the parties for the
purpose of transferring title to goods which of course presupposes capacity to contract, that it must be supported
by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless
all these elements are present, there can be no sale.
Thus, if merely title to the goods passes but not as a
result of any contract between the parties, express or
implied, there is no sale."
This Court also held that the State Legislature, by enlarging the
. definition of "sale", could not include transactions which were not
sales according to the well established concepts of law under the
Law of Contract or the Sale of Goods Act; see Sales-tax Officer
v. Budh Prakash(') and George Oakes v. State of Madras( 8 ).
Bearing that in mind let us look at clause (ff) in section 2 of
the Principal Act in which the said clause was inserted.
The ingredients of the definition of "purchase" are as follows : (i) there
shall be acquisition of goods; (ii) the acquisition shall be for cash
·Or deferred payment or other valuable consideration; (iii) the said
valuable consideration shall not be other than under a mortgage,
hypothecation, charge or pledge. Clause (h) of section 2 defines
"sale" thus :
"sale" means any transfer of property in goods other
than goods specified in Schedule C for cash or deferred
payment or other valuable consideration but does not
include a mortgage, hypothecation, charge or pledge.
If we turn to the Sale of Goods Act, section 4 thereof defines
a contract of sale of goods.
It reads :
"Contract of sale of goods is a contract whereby the
seller transfers or agrees to transfer the property in goods
to the buyer for a price .... "
(I) [1959] S .. C.R. 379, 397-398.
(21 A.l.R. 19M S.C. 459.
r3) A.LR. 1962 S.C. 1037.
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DBVI DAS v. PUNJAB (Subba Rao, C.J.)
571
The essentinl requisite of 1ulc are (i) there shall be a transfer of
property or agreement to trnnsfer property by one pnrty to an·
other; and (Ii) it shall be for considerntion of money payment or
promise thereof by the buyer. A sale nnd 11 purchase are different
aspects of the liume trumuctlon. lf we look at it from the stand·
point of a purchaser it is ~urchase and if we look at it from the
standpoint of the seller it is 11 sale. Whether purchase or sale it
shall have the snid ingredients hoth in common law and under the
lndlnn Contract Act. 'Price' has been defined In the Sale of Ooods
Act to mean money considerntion for the 111le of goods : see s.
20 0) of the Indian Sale of Oood8 Act. lt wlll, therefore, be 1een
!hut the d~Hnitlon of 'purchnse' In the Act pr/ma faclr appears to
be wider In scope thnn 'snle'. While tronsfer of l!Oods from one
C
per1on to onother Is the lngr~dl~nt tJf '8nle' In genernl lnw, 11equlMI·
lion of goud~, which mny In II• ~omprehen!lve 8ense 111k11 In vohm·
tnry H well u11 lnvoluntur. trnn8forn, l~ nn 1n11redlent of 'pureh1m1'
in e111us11 (lfJ.
While prlee', i.r .. money con11lderntlon, 18 the
Ingredient or '8ul~', tn!h, dderrnd pnyment or My vnluable eon·
11ider11tlon l• nn ln11rndle111 of 'purehn~ll'. But 11 do11er Nerutlny
tomeet8 u• to give u rnmkted menning Ill the exprn1111hm "aequlsl·
tion ond "priee",
Aequl11ltiort i11 the n<:t by whleh n penon 11e·
quires property in n thing. "AeQ1tirn" Is Ill bl!eome the owner of
the pmp~tty. One enn, therdur~. utqutrn 11 pmperty either by
voluntnry or lnvolmltury trun•fer, But the Snle11 Tnx Aet opplle~
1111ly to "•nle" us denned In the A~t. Under elnu8e (h) of seetlon
:! or the! Att it l• den1wd "' n tr1m~fer of pmperty.