# SATNAM OVERSEAS(EXPORT)THROUGH ITS PARTNER ETC. ETC v. STATE OF HARYANA AND ANR. ETC. ETC

- **Citation:** [2002] Supp. 3 S.C.R. 271
- **Court:** Supreme Court of India
- **Decided:** 2002-10-24
- **Case number:** Civil Appeal No. 11174 of 1975
- **Bench:** Syed Shah Mohammed Quadri, Ruma Pal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/satnam-overseas-export-through-its-partner-etc-etc-v-state-of-haryana-and-anr-18761
- **Pages:** 35

## Headnote

A
B
Haryana General Sales Tax Act, 1973 I Punjab General Sales Tax Act,
1948-Section 9, Sections 2(p), 6, 15, 15-A and 17 (as amended by Haryana C
Act 4of1991) and Section 40 I Section 4 and 4-B-Purchase tax-On paddy
meant for export of rice procured therefrom-Exemption from tax granted
under Section 9 (J)(b)-Levy of tax after amendment of Sections 2(p), 6, 15
and 15-A with retrospective effect and omission of Section 9-However during
the relevant assessment year Section 9 existed-Propriety of the levy-Held,
In the specified circumstances in which charge of purchase tax on the raw D
material is imposed, exemptions under Section 9(J)(b) are applicable-While
Section 9 remained on the statute on the date of assessment, retrospective
amendments of Section 2(p), 6, I 5 and 15-A of the Haryana Act would make
no difference in regard to levy of purchase tax on paddy-Denial of refund
of purchase tax paid by a dealer by virtue. of Section I 5~A is not illegal or
unconstitutional-Assessee is not entitled to exemption under section 5(3) of E
the Central Sales Tax A ct-Assessees are liable to pay tax on the purchase of
paddy under Section 4 of the Punjab Act and the similarity between Section
4-B of the Pwyab Act and Section 9(J)(b) of Haryana Act would not relieve
the assessee from such liability-Constitution of India, I950-Article 286Central Sales Tax Act, 1956-Section 5, I 5.
F
Legislative competence-Levy of impost with retrospective effect-Held,
Legislature is competent to levy retrospectively.
In the appeals arising under Haryana General Sales Tax Act, 1973,
assessee a miller-exporter used to purchase paddy, and after .;.ming the G
same used to export the rice procured therefrom. For the Assessment
Years 1982-83, 1983-84, 1988-89 and 1989-90 the assessing authority
granted benefit of Section 9(1)(b) of the Haryana Act and raised 'nil'
demands on the ground that the transactions of purchase of paddy by the
assessee were for export of rice procured therefrom. Deputy Excise and
271
H
272
SUPREME COURT REPORTS [2002) SUPP. 3 S.C.R.
A Taxation Commissioner (lnspection)-cum-Revisional Authority issued
show cause notice, and revised the assessment for the said years in view
of retrospective amendment of Sections 6, 15, ISA and 17 and omission
of Section 9 thereof holding that assessee was liable to pay purchase tax
on the paddy. However, omission of Section 9 was not retrospective and
B during the assessment years in question the amended Section 6 as well as
Section. 9 were o_n the Statute Book. Assessee challenged the abovesaid
amendments to the Haryana Act by filing writ petitions before High Court,
which upheld the validity of the impugned provisions and orders of Deputy
Commissioner ~evising the assessments.
C
The cases arising under Punjab General Sales Tax Act, 1948 relate
to assessment year 1990-91 and 1991-92. In this case, the assessee
purchased paddy in the State of Punjab, milled the same and exported
the rice outside the territory of India. Tax was not paid on the purchase
of paddy. Show cause notices were issued to demand purchase tax on the
paddy converted into rice. The demand was confirmed and unsuc!=essfully
D assailed in the High Court.
E
In appeal to this Court with regard to the cases pertaining to
Haryana Act, the assessee contended that Section 9 of the Act imposes
charge of purchase tax on paddy and Clause (b) of sub-section (I) of the
said Section exempts the same as rice procured therefrom is exported; that
it is not correct that with omission of Section 9 from the statute,
amendment of Section 6 and inclusion of Section 15-A with retrospective
effect from 27.5.1971, the liability to pay purchase tax is regulated by
Section 6 read with Section 15 and adjustments, if any, could be made
under Section 15-A of the Act; that it is not correct that omissio.n of Section
p 9 from the statute had no effect in view of the amendment of Section 6
and inclusion of Section l S~A; that as paddy purchased by the assessee
was export

## Text

_Characters 0–39,815 of 86,012. This is a partial read: ask again with offset=39815 for what follows._

SATNAM OVERSEAS(EXPORT)THROUGH ITS
PARTNER ETC. ETC.
v.
STATE OF HARYANA AND ANR. ETC. ETC.
OCTOBER 24, 2002
[SYED SHAH MOHAMMED QUADRI AND RUMA PAL, JJ.]
A
B
Haryana General Sales Tax Act, 1973 I Punjab General Sales Tax Act,
1948-Section 9, Sections 2(p), 6, 15, 15-A and 17 (as amended by Haryana C
Act 4of1991) and Section 40 I Section 4 and 4-B-Purchase tax-On paddy
meant for export of rice procured therefrom-Exemption from tax granted
under Section 9 (J)(b)-Levy of tax after amendment of Sections 2(p), 6, 15
and 15-A with retrospective effect and omission of Section 9-However during
the relevant assessment year Section 9 existed-Propriety of the levy-Held,
In the specified circumstances in which charge of purchase tax on the raw D
material is imposed, exemptions under Section 9(J)(b) are applicable-While
Section 9 remained on the statute on the date of assessment, retrospective
amendments of Section 2(p), 6, I 5 and 15-A of the Haryana Act would make
no difference in regard to levy of purchase tax on paddy-Denial of refund
of purchase tax paid by a dealer by virtue. of Section I 5~A is not illegal or
unconstitutional-Assessee is not entitled to exemption under section 5(3) of E
the Central Sales Tax A ct-Assessees are liable to pay tax on the purchase of
paddy under Section 4 of the Punjab Act and the similarity between Section
4-B of the Pwyab Act and Section 9(J)(b) of Haryana Act would not relieve
the assessee from such liability-Constitution of India, I950-Article 286Central Sales Tax Act, 1956-Section 5, I 5.
F
Legislative competence-Levy of impost with retrospective effect-Held,
Legislature is competent to levy retrospectively.
In the appeals arising under Haryana General Sales Tax Act, 1973,
assessee a miller-exporter used to purchase paddy, and after .;.ming the G
same used to export the rice procured therefrom. For the Assessment
Years 1982-83, 1983-84, 1988-89 and 1989-90 the assessing authority
granted benefit of Section 9(1)(b) of the Haryana Act and raised 'nil'
demands on the ground that the transactions of purchase of paddy by the
assessee were for export of rice procured therefrom. Deputy Excise and
271
H
272
SUPREME COURT REPORTS [2002) SUPP. 3 S.C.R.
A Taxation Commissioner (lnspection)-cum-Revisional Authority issued
show cause notice, and revised the assessment for the said years in view
of retrospective amendment of Sections 6, 15, ISA and 17 and omission
of Section 9 thereof holding that assessee was liable to pay purchase tax
on the paddy. However, omission of Section 9 was not retrospective and
B during the assessment years in question the amended Section 6 as well as
Section. 9 were o_n the Statute Book. Assessee challenged the abovesaid
amendments to the Haryana Act by filing writ petitions before High Court,
which upheld the validity of the impugned provisions and orders of Deputy
Commissioner ~evising the assessments.
C
The cases arising under Punjab General Sales Tax Act, 1948 relate
to assessment year 1990-91 and 1991-92. In this case, the assessee
purchased paddy in the State of Punjab, milled the same and exported
the rice outside the territory of India. Tax was not paid on the purchase
of paddy. Show cause notices were issued to demand purchase tax on the
paddy converted into rice. The demand was confirmed and unsuc!=essfully
D assailed in the High Court.
E
In appeal to this Court with regard to the cases pertaining to
Haryana Act, the assessee contended that Section 9 of the Act imposes
charge of purchase tax on paddy and Clause (b) of sub-section (I) of the
said Section exempts the same as rice procured therefrom is exported; that
it is not correct that with omission of Section 9 from the statute,
amendment of Section 6 and inclusion of Section 15-A with retrospective
effect from 27.5.1971, the liability to pay purchase tax is regulated by
Section 6 read with Section 15 and adjustments, if any, could be made
under Section 15-A of the Act; that it is not correct that omissio.n of Section
p 9 from the statute had no effect in view of the amendment of Section 6
and inclusion of Section l S~A; that as paddy purchased by the assessee
was exported albeit in the form of rice, the purchase of paddy itself would
be deemed to be in the course of export; and that requirement of Article
286 of the Constitution of India and Section 15( c) of Central Sales Tax
Act, 1956 are mandatory and this accounts for clause (iii) of the proviso
G to sub-section (I) of Section 15 of the Haryana Act, therefore, Section 15A of the Haryana Act in so far as it denies the benefits of adjustment/
refund of purchase tax in regard to paddy, is unconstitutional and ultra
vires. Alternatively it was contended that the amendment of section 15-A
by ordinance 1 of 1992 took away the benefit of adjustment/refund
H retrospectively from 27.5.1971 availed by the assessee for the last 21 years
SA TN AM OVERSEAS (EXPORT) THROUGH ITS PARTNER''· STA TE
273
•
which is unjust, arbitrary and unconstitutional.
A
The State-respondent contended that paddy and rice were two
different 'goods', therefore, on the export of rice the assessee could not
claim exemption on the purchase of paddy either under section 5(3) of
Central Sales Tax Act or under Article 286(l)(b) of the Constitution,
because penultimate sale was not that of rice but of paddy; and that only B
when paddy undergoes various processes which tantamounts to
manufacture, rice could be procured.
With regard to the cases arising under Punjab Act it was contended
by the assessee that Section 48 of the Act is analogous to Section 9(l)(b) C
of the ilaryana Act and as Section 4-B exists till date, the judgment of
this Court in Murli tlanohar's case and Jagatjeet Sugar Mills case would
apply, and therefore, there can be no demand of purchase tax on paddy.
State of Punjab contended that neither the assessee was the exporter
nor the rice procured from paddy was exported so the assessee would be D
liable to pay purchase tax on paddy.
Disposing of the appeals, the Court
HELD: 1.1. In the specified circumstances in which charge of
purchase tax on the raw material is imposed, Section 9(I)(b) of Haryana E
General Sales Tax Act, 1973 and the exemptions provided therein would
apply. While Section 9 remained on the statute till April 1, 1991,
retrospective amendment of Sections 2(p), 6, 15 and 15-A of the Haryana
Act would make no difference in regard to levy of purchase tax on paddy.
Adjustment of purchase tax paid on paddy (raw material) is permissible
under Section 15-A of the Haryana Act during the relevant period. By F
virtue of Section 15-A of the Haryana Act, denial of refund of purchase
tax, if any, paid by a dealer is not illegal much less unconstitutional.
(304-D-Fl
1.2. Specific charging provision of Section 9(l)(b) will be attracted
as the assessee purchased paddy (which is not one of the goods specified G
in Schedule B), procured rice (manufactured goods) froni the said paddy
and exported rice outside the territory of India, on which no purchase tax
was payable under the general charging provision of Section 6 which is,
inter alia, subject to the provisions of Section 9. The assessees will not be
liable to pay tax on the purchase of such paddy in view of the provisions H
274
SUPREME COURT REPORTS [2002] SUPP. 3 S.C.R.
A of Section 9(1)(b) in the assessment years in question, or, for that matter,
any assessment year ending before April 1, 1991. 1288-H; 289-A, Bl
i.3. Section 6 of Haryana Act, by itself does not create an
independent charge on the declared goods. It merely indicates the stage
at which the tax shall be leviable and payable. Indeed, Section 6(1 )(a) itself
B mentions that in respect of the declared goods tax shall be levied at- the
stage specified in Section 17. The legislature enacted a specific provision
!Section 9(1)(b) ] with regard to levy and payment of purchase tax on
paddy when rice is procured therefrom and exported outside India. It
cannot be said that in view of Section 17 of the Haryana Act, levy of
C purchase tax on paddy would be valid notwithstanding the fact that the
same ~s exempted under section 9(l)(b). 1289-G, H; 290-A, B)
1.4. The amendment to the definition of 'turnover' in Section 2(p)
and of Section 6 does not affect the position when Section 9 is part of the
statute. For the purpose of Section 6 read with Section 15 of the Haryana
D Act, a dealer is liable to pay tax on the taxable 'turnover of his sales and
purchases. Inasmuch as the sale of paddy is taxable under the Act, the
purchase value of such paddy cannot be included in the turnover; it is
evident that no purchase tax can be imposed under Section 6 of the
Haryana Act. This explains the reason as to why Section 9 specifically
provides that the charge thereunder shall be levied in the circumstances
E in which no tax is payable under any other provision of the Act (290-C-E)
Murli Manohar and Co. and Anr. v. State of Ha1yana and Anr. (19911
1SCC377; Hotel Balaji and Ors. v. State of Andhra Pradesh and Ors., (19931
Suppl. 4 SCC 536 and K.B. Handicrafts Emporium and Ors. v. State of
F Haryana and Ors., 119931 Supp. 4 sec 589, relied on.
Goodyear India Ltd. and Ors. v. State of Haryana and Anr., (1990) 2
SCC 71 and Jagatjit Sugar Mills and Ors. v. State of Punjab and Anr., 11995)
1 sec 67' referred to
G
1.5. When in order to fulfil an export obligation some goods are
purchased and processed which resulted in change of the identity and
character of the goods like processing of paddy into rice, which is exported,
then it would not be an export of the same goods. Therefore, the assessee
will not be entitled to exemption under section 5(3) of the Central Sales
Tax Act, 1956. Section 5(3) treats penultimate sale of the goods which are
H exported as _the sale in the course of export. It is difficult to accept that
SA TN AM OVERSEAS (EXPORT) THROUGH ITS PARTNER"· STATE
275
paddy and rice are the same goods. The usual commercial parlance test A
that is applied is how such goods are known in the commercial circles. It
is a common knowledge that paddy and rice are treated in the market as
two different commodities. 1296-H; 297-A, Bl
Ganesh Trading Co., Karna/ v. State of Haryana and Anr., 1197413 SCC
620 and Babu Ram Jagdish Kumar and Co. v. State of Punjab and Ors., 119791 B
3 sec 616, relied on
State of Travancore-Cochin and Ors. v. Shanmugha Vilas Cashew Nut
Factory and Ors., 11954) SCR 53; Vijay Lakshmi Cashew Company v. Deputy
Commercial Tax Officer, 119561 1 SCC 468; Sterling Foods v. State of
Karnataka, (1986] 3 SCC 469 and Deputy Commissioner of Sales Tax v. Pio C
Food Packers, (19801 Suppl. SCC 174, referred to.
1.6. Article 286(1) of the Constitution protects sale or purchase which
takes place (a) outside the State or (b) in the course of import of goods
into or export of the goods out of the territory of India, from a State Law D
imposing or authorizing imposition of a tax. Section 15(c) of Central Sales
Tax Act directs that where in respect of sale or purchas·e of paddy, tax
has been levied in a State, then the tax leviable on the rice procured out
of such paddy shall be reduced by the amount of tax levied on such paddy.
This is to ensure that paddy and rice, being declared goods considered to
be of special importance in the inter-State trade or commerce, be relieved E
of so much burden of tax on rice as has been levied on the paddy from
which rice has been procured. It appears that clause (iii) of the proviso to
sub-section (1) of Section 15 of Haryana Act reflects the intendment of
clause (c) of Section 15 of the Central Sales Tax Act. It is not possible to
accept that Section 15-A of Haryana Act denies adjustment in regard to F
the tax paid on the purchase of paddy , as it is clear that in view of the
opening words of section 15-A of Haryana Act, inserted by the amendment,
it is subject to clause (iii) of the proviso to sub-section (1) of Section 15 of
the Haryana Act so as to deny the benefit of adjustment. It, therefore,
follows that the assessees are entitled to adjustment of purchase tax paid
on paddy when the rice procured therefrom is taxed. 1300-B-Fl
G
1.7. It is true that Section 15-A of Haryana Act does not permit
refund of purchase tax paid on paddy, cotton and oilseeds by an assessee
though such a relief is available in regard to other goods. Challenge to
Section 15-A of Haryana Act on the ground of violation of Section 15(c)
of the Central Sales Tax Act or Article 286 (l)(b) of the Constitution H
276
SUPREME COURT REPORTS [2002) SUPP. 3 S.C.R.
A cannot be sustained because the only relief that is granted by Section 15(c)
of Central Act is reduction of tax leviable on the sale of rice procured from
?u~ of paddy, where tax has been levied on sale or purchase of such p~ddy
ms1de the State. This relief is incorporated by the Haryana Act in clause
(iii) of the proviso to sub-section (1) of Section 15. Even Article 286(1)(b)
B does not provide for exemption of tax on the purchase of paddy. There is
no other provision either in Article 286 or in the Central Sales Tax Act
which bars a State from levying tax on the sale or purchase of paddy which
is not exported out of the territory of India. Section 15-A of Haryana Act
proceeds on the premise that purchase tax is payable, inter alia, on paddy.
Thus, it is clear that before the omission of Section 9 from the Haryana
C Act, no purchase tax was payable on paddy under Section 6 of the Act,
therefore, during the aforesaid period, the assessee cannot complain of the
den iii I of the benefit of adjustment and refund of purchase tax on. the basis
of Section. \5-A of the Haryana Act. The position would, however, be
different after April 1, 1991, when Section 9 was omitted from the Act.
D
1300-F-H; 301-A, BJ
1.8. in the instant case, having regard to the provisions of Section
40 of the Haryana Act, the authorities can not revise the. assessment for
period beyond five years. Further, even though Section 15-A of Haryana
Act was given retrospectivity with effect from May 27, 1971, it would.
E hardly be effective between May 27, 1971 and April 1, 1991 when the
benefit of exemption under section 9(1)(b) ceased to exist, as such the
contentions that giving Section 15-A retrospectivity of 21 years would be
harsh, arbitrary and illegal are devoid of merit. (302-G, H; 303-AI
1.9. No relief was available in regard to penultimate purchase of
F paddy which was converted into rice and exported. This position obtained
till clause (ca) of Section 15 of the Central Sales tax Act was inserted by
Act 33of1996 on September 28, 1996. Clause (ca) provides, where a tax
on sale or purchase of paddy is leviable under a State Law and the rice
procured out of such paddy is exported out of India then for the purposes
of sub-section (3) of section 5 of Central Sales tax Act, the paddy and rice
G have to be treated as a single commodity. Clause (ca) cannot be said to be
clarificatory for, it neither supplies an obvious omission in the Central
Sales tax Act nor purport to explain any provision of that Act. It confers
a new benefif hitherto not available. It is not given retrospective effect
expressly. There is also nothing to.imply that it has retrospective operation.
H However, had it been declaratory or curative, it would have been treated
..
SA TNAM OVERSEAS (EXPORT) THROUGH ITS PARTNER v. STA TE
277
as retrospective. (303-A, B, D(
Shri Chaman Singh and Anr. v. Srimathi Jaikaur, [19691 2 SCC 429,
referred to.
'Craies on Statute Law', referred to.
l.10. It cannot be said that in not granting refund of purchase tax
only in regard to three goods-paddy, cotton and oil seeds-there is violation
of Article 14 of the Constitution. In the matter of taxation, the legislature
A
B
has greater latitude to give effect to its policy of raising revenue and for
that purpose selecting the goods for taxing. The classification of goods
based on the policy of taxing some goods and leaving others outside the C
net of taxation cannot be assailed as violative of Article 14 of the
Constitution. (303-E, Fl
Mis. Steelworth Ltd v. State of Assam, [ 1962) Suppl. 2 SCR 589; Gopal
Narain v. State of Uttar Pradesh and Anr., (1964) 4 SCR 869; Murthy Match D
works, etc. etc. v. The Asstt. Collector of Central Excise, etc., (1974) 3 SCR
121; Gang~ Sugar Corporation Ltd. v. State of Uttar Pradesh and Ors., (1980)
l sec 223, referred to.
2.1. Mere similarity between Section 9(l)(b) of the Haryana Act and
Sectio.n 4-B of Punjab G_eneral Sales Tax Act, 1948 would not relieve a E
. dealer oftlle liability to pay purchase tax on paddy as the scope of charging
Sections under the said Acts are different. [304-G)
2.2, A plain reading of Section 4 of Punjab Act shows that it is subject
to the provisions of Sections 5 and 6. It cannot but be held that the
assessees are liable to pay tax on the purchase of paddy under Section 4 F
of the Punjab Act and the similarity between Section 4-B of the Punjab
Act and Section 9 of the Haryana Act is of no assistance. (294-D; 296-8)
Murli Manohar & Co. and Anr. v. State of Haryana and Anr., (1991 [ 1
sec 377 and Jagatjit Sugar Mills and Ors. v. State of Punjab and Anr., (19951 G
1 sec 67, distinguished.
3. Legislature is competent to levy impost, it can as well legislate
retrospectively. (301-C[
Rai Ramkarishna and Ors. v. The State of Bihar., (19641 I SCR 897; H
278
SUPREME COURT REPORTS [2002] SUPP. 3 S.C.R.
A Jawaharmal v. State of Rajasthan and Ors., 119661 I SCR 890; Mis. J.K.
Cotton S~inning and Weaving Mills Ltd. and Anr. v. Union of India and Ors.,
11987] Supp. SCC 350 and State of Tamil Nadu v. Arooran Sugars ltd.,
(1997] l sec 326, relied on.
B
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 11174 of
1975.
c
From the Judgment and Order dated 17 .8.1995 of the Punjab and
Haryana High Court in C.W.P. No. 7576 of 1993.
WITH
C.A. Nos.11175-78, 11183-84, 11179, 11180, 11181, 11182/95, 2552,
2254,2553, 1581-96, 7679-7681,3664,3665,3666,3667,3668,3669, 1258387, 3670,_257, 1597-1606, 1607, 2220, 3661, 3662, 3663, 3834-36, 1287778/96, 346/97, 3993/99, W.P.(C) Nos.82/96, 36, 141, 144, 178, 179, 181,
D 537, 538, 668, 675, 676, 240 of 1998 with C.A. Nos. 6940-57 and 6958 of
2002.
P. Chidambaram, D.A. Dave, Anoop G. Chaudhary, V.C. Mahajan,
Mahendra Anand, C.S. Vaidyanathan, Ms. Anjana Gosain, D.S. Chauhan,
E Ms. Bina Gupta, Ramesh Singh, Ms. Vanita Bhargava, Ms. Rakhi Ray, Sarwa
· Mitter, Ms. Santosh Gupta, Ms. June Chaudhary, Amit Gupta, P. Venugopal,
P.S. Sudheer, K.J. John, R.P. Gupta, O.P. Goyal, Haris Beeran, Pradeep
Gupta, Kau,shal Yadav, K.K. Mohan, K.K. Gupta, Gopal Jain, P. Manish Ms.
Nisha Bagchi, Sukhdip Singh Barar, Adv. for Uday Umesh Lalit, Atul Nanda,
Rajeev Sharma, R.S. Suri, Neeraj Kumar Jain, Aditya Kumar Chaudhary,
F Bharat Singh for J.P. Dhanda, Manoj Swarup, (NP) K.S. Rana, (NP), Ms.
Indra Sawhney (NP), P.N. Puri, (NP) for the appearing parties.
The Judgment of the Court was delivered by
SYED SHAH MOHAMMED QUADRI, J. Leave is granted in the
G special leave petitions.
The solution to the questions raised in this batch of cases turns on a
true interpretation of the provisions of the Haryana General Sales Tax Act,
1973 (for short, "the Haryana Act")/the Punjab General Sales Tax Act, 1948
H (for short, "the Punjab Act") in the light of the provisions of Article 286 of
..
..
SATNAM OVERSEAS (EXPORT) THROUGH ITS PARTNER v. STATE [QUADRI,J.] 279
the Constitution and the Central Sales Tax Act, 1956 (for short, "the CST A •
Act").
For the sake of convenience, these cases can be divided into two groups.
(A) The first consists of two categories of cases arising under the Haryana
Act in respect of assessments for the period : (i) ending with October 14,
1990 and (ii) between October 15, 1990 and September 28, 1996; and (B) B
The second takes in cases arising under the Punjab Act.
Mr. P. Chidambaram, the learned senior counsel appearing for the
appellants, has piloted the arguments in the batch, which were adopted by
other learned counsel appearing for the appellants in different appeals/writ C
petitions. The contentions of the learned counsel are two fold. The first
being, Section 9 of the Haryana Act imposes charge of purchase tax on
paddy and clause (b) of sub-section (I) of the said section exempts the same
as the rice procured therefrom is exported. The second is that the High Court
committed error in holding that with omission of Section 9 from the Statute,
amendment of Section 6 and inclusion of Section 15A with retrospective D
effect from 27.5.1971, the liability to pay purchase tax is regulated by Section
6 read with Section 15 and adjustments, if any, could be made under Section
15-A of the Haryana Act. The case of the State of Haryana, as projected by
the learned senior counsel, Mr. Mahendra Anand, is that the Haryana Act
contains more charging sections than one, viz., Sections 6, 9 and 17; as E
Section 9 has been omitted and Sections 2(p), 6, 15 and 15-A have been
amended retrospectively, the assessee is liable to pay tax on purchase of raw
material.
For appreciating the contentions, we shall take up the cases falling
under groups (A)(i) and (B), which go together. It would suffice to refer to F
the facts giving rise to Civil Appeal Nos.11175-11178 of 1995. The assessee
is a miller-exporter who purchases paddy in the State of Haryana, mills the
same and exports the rice procured therefrom to places outside the territory
of India. For the Assessment Years 1982-83, 1983-84, 1988-89 and 1989-90,
on the ground that the transactions of purchase of paddy by the assessee were
for export of rice procured therefrom, the assessing authority granted benefit G
of Section 9(1 )(b) of the Haryana Act and completed assessments raising
'Nil' demand. However, the Deputy Excise and Taxation Commissioner
(lnspection)-cum-Revisional Authority, Kamal, (for short, "Dy.
Commiss:oner") issued show cause notice under Section 40 of the Haryana
Act and, after giving due opportunity of being heard to the assessee, revised H
280
SUPREME COURT REPORTS [2002] SUPP. 3 S.C.R.
A the assessment for the said years in view of the retrospective amendment of
Sections 6, 15, l 5A and 17 and omission of Section 9 thereof holding that
the assessee was liable to pay the purchase tax on the paddy. The assessees
challenged amendments of Sections 6, 9, 15, 15-A and 17 of the Haryana Act
which were given retrospective effect by filing writ petitions before the High
B Court of Punjab and Haryana. A Full Bench of the High Court upheld the
validity of the impugned provisions of the Haryana Act and the orders of the
Dy. Commissioner revising the assessments and, thus, dismissed the writ
petitions. The appellants are in appeal, by special leave, before this Court
challenging the legality of the judgment and order of the Full Bench of the
High Court.·
c
It needs to be noticed, at the outset, that in view of the provisions of
sub-section (3) of Article 246 read with Entry 54 of List II of the Seventh
Schedule to the Constitution, a State is competent to legislate authorising
imposition of.taxes on the sale or purchase of goods (other than newspaper),
subject to the provisions of Entry 92A of List-I. Under the said Entry [92A
D of List-I], the Parliament is competent to legislate authorising imposition of
taxes on the sale or purchase of goods (other than newspaper}, where such
sale or purchase takes place in the course of inter-State trade or commerce.
In other words, any Act passed by a State Legislature authorising imposition
of taxes on sale or purchase of goods will be subject to the legislation made
E by the Parliament under Entry 92A of List -I of the Seventh Schedule to the
Constitution.
F
G
H
A reference to Article 286 of the Constitution of India would also be
apposite. It prescribes restriction as to the imposition of tax on the sale or
purchase of goods and is in the following tenns:
"286. Restrictions as to imposition of tax on the sale or purchase of
goods:~(!) No law of a State shall impose, or authorise the imposition
of, a tax on the sale or purchase of goods where such sale or purchase
takes place-
. (a) outside the State; or
(b) in the course of the import of the goods into, or export of the
goods out of, the territory of India.
(2) Parliament may by law formulate principles for detennining when
a sale or
1purchase of goods takes place in any of the ways mentioned
in clause (I}.
SATNAM OVERSEAS (EXPORT) THROUGH ITS PARTNER v. STATE (QUADRI, J.] 28 J
(3) Any law of a State shall, in so far as it imposes, or authorises the A
imposition of, -
(a) a tax on the sale or purchase of goods declared by Parliament by
law to be of special importance in inter-State trade or commerce, or
(b) a tax on the sale or purchase of goods, being a tax of the nature B
referred to in sub-clause (b ), sub-clause ( c) or sub-clause ( d) of
clause (29A) of article 366,
be subject to such restrictions and conditions in regard to the system
of levy, rates and other incidents of the tax as Parliament may by law
specify."
A plain reading of clause (I) of the Article, noted above, ·shows that it
lays down restrictions on a State law as to the imposition or authorising the
imposition of a tax on sale or purchase of goods where such sale or purchase
takes place (a) outside the State or (b) in the course of import of goods into
c
or export of goods out of the territory of India. Clause (2) thereof empowers D
the Parliament to formulate principles for determining as to when a sale or
purchase of goods takes place in any of the ways aforementioned. The directive
embodied in clause (3) is that any law of a State shall, insofar as it imposes
or authorises the imposition of tax, specified in sub-clauses (a) and (b) thereof,
be subject to such restrictions and conditions in regard to the system of levy,
rates and other incidence of tax, as the Parliament may by law specify. The E
said sub-clauses are as follows: (a) a tax on the sale or purchase of goods
declared by Parliament by law to be of special importance in inter-State trade
or commerce (the declared goods); or (b) a tax on the sale or purchase of
goods being a tax of the nature referred to in sub-clause (b ), sub-clause ( c)
or sub-clause ( d) of clause 29A of Article 366.
In exercise of the power conferred under clause (2) of Article 286, the
Parliament enacted the CST Act formulating principles for determining when
a sale or purchase of goods takes place in the course of inter-State trade or
commerce or outside a State or in the course of import or export. Section 5
F
of the CST Act embodies the principles as to when a sale or purchase of G
goods is said to take place in the course of import or export. Sub-section (I)
of Section 5 says that a sale or purchase of goods shall be deemed to take
place in the course of export of the goods out of the territory of India only
if the sale or purchase either occasions such export or is effected by a transfer
of documents of title to the goods after the goods have crossed the customs
frontiers of India. Sub-section (2) provides that a sale or purchase of goods H
282
SUPREME COURT REPORTS (2002] SUPP. 3 S.C.R.
A shall be deemed to take place in the course of import of goods into the
territory of India only if the sale or purchase either occasions such import or
is effected by a transfer of documents of title to the goods before the goods
have crossed the customs frontiers oflndia. Sub-section (3), which commences
with a non-obstante clause, provides that despite sub-section (I), the last sale
B or purchase of any goods preceding the sale or purchase occasioning the
export of those goods out of the territory of India, shall also be deemed to
be in the course of such export if such last sale or purchase took place after
and was for the purpose of complying with the agreement or order for or in
relation to such export. In other words, the penultimate sale or purchase
before the sale or purchase occasioning the export of those goods shall be
C treated as a sale or purchase in the course of export of the goods. This is
incorporated to get over the judgment of this Court in Md. Serajuddin and
Ors. v. The State of Orissa, [1975] 2 SCC 47.
Next, we shall advert to Section 15 of the CST Act which runs thus:
D
"15. Restrictions and condi~ions in regard to tax on sale or purchase
of declared goods within a State.-- Every sales tax law of a State
shall, insofar as it imposes or authorises the imposition of a tax on the
sale or purchase of declared goods, be subject to the following
restrictions and conditions, namely:-
E
(a) the tax payable under that law in respect of any sale or purchase
of such goods inside the State shall not exceed four per cent of
the sale or purchase price thereof, and such tax shall not be
levied at more than one stage;
(b) · where a tax has been levied under that law in respect of the sale
p
or purchase inside the State of any declared goods and such
goods are sold in the course of inter-State trade or commerce,
and tax has been paid under this Act in respect of the sale of
such goods in the course of inter-State trade or commerce, the
tax levied under such law shall be reimbursed to the person
G
H
making such sale in the course of inter-State trade or commerce
· in such manner and subject to such conditions as may be provided
in any law in force in that State;
( c) where a tax has been levied under that law in respect of the sale
or purchase inside the State of any paddy referred to in subclause (i) of clause (i) of section 14, the tax leviable on rice
procured out of such paddy shall be reduced by the amount of
SA TN AM OVERSEAS (EXPORT) THROUGH ITS PARTNER v. STATE [QUADRI, J.] 283
tax levied on such paddy;
A
(ca) where a tax on sale or purchase of paddy referred to in subclause (i) of clause (i) of Section 14 is leviable under the law and
the rice procured out of such paddy is exported out of India,
then, for purposes of sub-section (3) of Section 5, the paddy and
rice shall be treated as a single commodity;
B
(d) each of the pulses referred to in clause (via) of Section 14, whether
whole or separated, and whether with or without husk, shall be
treated as a single commodity for the purposes of levy of tax
under that law."
The provisions, quoted above, enumerate the restrictions and conditions C
in regard to tax on sale or purchase of declared goods within a State, which
is defined in clause (c) of Section 2 of the CST Act to mean the goods
declared under Section 14 to be of special importance in inter-State trade or
commerce. It may be pointed out here that paddy and rice are enumerated in
sub-clauses (i) and (ii) respectively of clause (i) of Section 14 and they are, D
therefore, 'declared goods'.
Reverting-to Section 15, clause (a) imposes two restrictions on the tax
to be imposed on sale or purchase of declared goods inside the State : (I) an
upper ceiling of four per cent on sale or purchase price of such goods and
(2) such tax shall not be levied at more than one stage•. Clause (b) provides E
relief of reimbursement of tax paid under the CST Act in case of double
taxation of declared goods, that is, where tax has been levied under the State
Act on sale or purchase of such goods and is again levied under the CST Act
in respect of sale of such goods in the course of inter-State trade or commerce.
The edict of clause (c) makes it clear that a State law which imposes or F
authorises the imposition of tax on sale or purchase of rice or paddy inside
the State has to be treated in the following manner: where a tax has been
levied in respect of sale or purchase inside the State on paddy, the tax leviable
on rice procured out of such paddy shall be reduced by the amount of tax
levied on it (such paddy); for example, assuming that in a State the rate of
tax on the sale or purchase price of paddy is one per cent and of rice is four G
per cent, then the tax leviable on the sale of rice will be reduced by one per
cent; consequently, the tax payable on the sale of rice would be only three
per cent.
*This second assertion has been deleted by the Finance Act No. 20 of 2002 w.e.f. 1.4.2002.
H
284
SUPREME COURT REPOjUS [2002) SUPP. 3 S.C.R ..
A
Clause (ca) is inserted by The Finance (No.2) Act, 1996 (33 of 1996)
w.e.f. September 28, 1996. It directs that where a tax on sale or purchase of
paddy is leviable under a State law and the rice procured out of such paddy
is exported out of India then for purposes of penultimate sale (under Section
5(3)), the paddy and rice shall be treated as a single com.modity. In the
B circumstances mentioned in clause (ca), it brings paddy on par with pulses
dealt with in clause (d). The mandate embodied in clause (d) is that pulses
enumerated in clause (via) of Section 14, whether whole or separated, and
whether with or without husk, shall be treated as a single commodity for the
purposes of levy of tax under any State law.
C
In the light of the discussion of the afore-mentioned provisions of the
Constitution of India and of the CST Act, we proceed to interpret the relevant
provisions of the Haryana Act and the Punjab Act. The provisions of the
Haryana Act have undergone series of amendments and we deem it appropriate
to observe with concern that in the mass of amendments now it is by no
means an easy task for ariy legal practitioner or even a Court, and more so
D for a trader or an ordinary citizen, to cull out the correct position in regard
to one's liability on the sales and purchases of the goods in a given assessment
year before 1996. Be that as it may, we shall now deal with the contentions
of the learned senior counsel for the appellants/petitioners.
E
It may be mentioned that after formation of the State of Haryana on
November I, 1966, it adopted the Punjab Act which was in force in the then
composite State of Punjab. The Haryana Act was passed in the year 1973.
Between 1982 and April, 1991, Section 6 was amended as many as eight
times. The last amendment of Section 6 was by Ordinance No.2 of 1990,
which was promulgated on October 15, 1990 and later replaced by Haryana
F Act 4 of 1991 on April 16, 1991. By the said Act, the amended Section 6 was
given retrospective effect from May 27, I 971. It is unnecessary to refer to all
the earlier amendments as they have no bearing on the issue under
determination. Section 6, insofar as it is relevant for our purpose, as it stood
after the last mentioned amendment, read thus:
G
"Section 6. Incidence of Taxation - (I) Subject to other provisions of
this Act, every dealer whose gross turnover during the year
immediately preceding the 27th day of May, 1971, exceeded the
taxable quantum, shall from the 27th day of May, 1971 and every
other dealer shall, on the expiry of thirty days after the date on which
H
his gross turnover first exceeds the taxable quantum, be liable to pay
SATNAM OVERSEAS (EXPORT) THROUGH ITS PARTNER v. STATE [QUA DR!, J.] 285
tax under this Act on the sale or purchase of goods by him in the A
State at the stage hereinafter provided.-
(a) on declared goods at the stage specified under Section 17;
(b) & (c) xxx xxx xxx
Provided that this sub-section shall not apply to a dealer who deals B
exclusively in goods specified in Schedule B or who executes a subcontract with a contractor who is liable to pay tax in respect of the
works contract of which the sub-contract is a part:
Provided further that in the case of a dealer, -
(a) xxx xxx xxx
(b) who manufactures or processes any goods for sale, the liability
to pay tax shall commence, from the date on which his gross
turnover, during any year, first exceeds the taxable quantum;
(c) xxx
xxx
xxx
(d) who deals in declared goods, the liability to pay tax shall
commence from the date on which his gross turnover of such
goods exceeds the taxable quantum;
(e) to (h)
xxx
xxx
xxx
(3) to (5) xxx xxx xxx"
A perusal of the above provision would show that it is a charging
section. It opens with the phrase "subject to the other provisions of this Act"
c
D
E
; having been given retrospective effect from May 27, 1971, it would apply F
in regard to the assessment years in question, the last of them being 198990. The impost under Section 6 is: (I) subject to the other provisions of the
Act; (2) on every dealer whose gross tum over during the relevant period,
exceeds the taxable quantum; (3) on the taxable event of sale or purchase of
goods; and (4) in respect of declared goods (say paddy) tax is payable at the
stage of last purchase. What is subjected to tax is the difference between the G
'gross tum over' and the 'taxable quantum', which are defined in clauses
(gg) and (p), respectively, of Section 2. To comprehend the scope of the
charge under Section 6, which is subject to other provisions of the Act, it has
to be read with Section 2(p), Section 15, Section 17 and Section .27. A
combined reading of these provisions would disclose that tax is leviable on H
286
SUPREME COURT REPORTS [2002) SUPP. 3 $.C.R.
A ihe taxable tum over of sales or purchases of goods at the rate mentioned in
Section 15 at specified stages - in the case of declared goods at the stage
specified in Section 17.
The first proviso to sub-section (I) of Section 6 exempts: (a) a dealer
who deals exclusively in goods specified in Schedule 'B'; and (b) a dealer
B who executes a sub-contract with a contractor. These are the only exemptions
that Section 6 speaks of, though Section 13 confers power on the Government
to grant exemption in specified cases.
Here, it would be relevant to note that the said Haryana Act 4 of 1991,
C omitted Section 9 of the principal Act, which, be it noted, is not retrospective.
Consequently, in respect of the assessment years in question, Section 6, as
amended by Haryana Act 4 of 1991 as well as Section 9 of the Haryana Act
were on the Statute Book and this fact should be borne in mind while
considering Ieviability of the purchase tax on the raw material (Paddy) during
the period ending with Assessment Year 1989-90.
D
It, is pertinent to read Section 9 of the Haryam1 Act. Though Section 9
was also amended on ten occasions between 1976 and 1991, for the present
discussion, all those amendments are inconsequential. Section .9(1 )(b) as on
October 15, 1990, insofar·as it is relevant, is extracted here:
E
"Section 9.
F
G
(I), Where a dealer liable to pay tax under this Act,
(a) xxx xxx xxx
(b) purchases goods, other than those specified in Schedule B, from
any source in the State and uses them in the State in the
manufacture of any other goods and either disposes of the
manufactured goods in any manner otherwise than by way of
sale in the State or despatches the manufactured goods to the
place outside the State in any manner otherwise than by way of
sale in the course of inter-State trade or commerce or in the
course of export outside the territory of India within the meaning
of section 5 of the Central Sales Tax Act, 1956; or
(c) XXX
xxx
xxx
in the circumstances in which no tax is payable under any o~
H
provision of this Act, there shall be levied, subject to the provisions
SA TN AM OVERSEAS (EXPORT) THROUGH ITS PARTNER"· STATE [QUAD RI, J.] 287
of Section 17, a tax on the purchase of such goods at such rate as A
may be notified under Section 15."
This provision has had a chequered history. In Goodyear India Limited
and Ors. v. State of Haryana and Anr., (1990] 2 SCC 71, it was declared
ultra vires the power of the State Legislature. However, in Mur{i Manohar
and Co. and Anr. v. State of Haryana and Anr .. (1991] 1 sec 377, it was B
explained that the unconstitutionalily was confined to assignment sales.
Ultimately, in Hotel Balaji and Ors. v. State of Andhra Pradesh and Ors.,
(1993] Suppl. 4 SCC 536, it was declared that judgment of this Court in
Goodyear's case (supra) was not a good law. Consequently, Section 9(1)(b)
was a valid provision.