# SGP·EtEME 001'RT &EPORTS [1963] STATE OF MADHYA PRADESH v. AB1'EALT

- **Citation:** [1963] 3 S.C.R. 704
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Case number:** CIVIL APPELLATE JuarsDICTION : Civil App-ia,l No. 373 of 1961
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sgp-eteme-001-rt-eports-1963-state-of-madhya-pradesh-v-ab1-ealt-2665
- **Pages:** 12

## Headnote

19.llB --
704
SGP·EtEME 001'RT &EPORTS [1963]
STATE OF MADHYA PRADESH
v.
AB1'EALT
(S. K. DAS,
J. L. KAPUR,
A. K. SARKAR,
M. HIDAYATULLAH and RMlHUBAR DAYAL, JJ.)
'
Inter-State Trade-Discrimination-Sales Tax-Exemption:_Bales of harul·made footwear by manufacturer~Madhya ·
JJharat Sales Tax Act, 1950 (M. B. 30 of 1950), s•. 4(3)-
~onstitution of lndia,.Art. 304(a).
•
The respondent, a dealer in imported hand-made shoes
and chappals, claimed exemption in respect of his sales turn:
over on the basis of the notification issued under s. 5 of the
Madhya Bharat Sales Tax Act which exempted hand-made
shoes and chappals the sale price of which did not exceed
Rs. 12/8[· in case of sale by the manufacturer or by a member
of his family. The claim for exemption was rejected by the
Sales Tax Officer and the respondent was assessed on the
total turnover. The respondent challenged the assessment by
a petition under Art. 226 before the Madhya Bharat High
Court which allowed the petition on the veiw that the
exemption granted by the notification applied to sales of
hand-made shoes, chappals, etc., whether made within or
outside the State and held that any other interpretation of
the notification would bring it into conflict with Art. 304(a)
of the Constitution.
Helil, that the notification lays down three conditions
for the grant of exemption: (I) that the sale must be of
such shoes, chappals etc., as are hand.made and not manufactured on power machine ; (2) that the sale price must not
exceed Rs. 12-8-0 per pair ; and (3) that the sale must be
by the manufacturer or any
membe1 of his family.
The
notification when it uses the expre~sion "in case of sale" has
reference to the taxable event in the State; in other words,
it refers to a sale in the State and not outside it.
Therefore
the notification has re:(ererice to such sales as would come but
for the exemption within item 32 of Schedule 3 of the
notification.
The interptetation put by the High Court
would obliterate one of the conditions and is not cOrrect.
Helrl,
further, that the
exemption granted by the
notification is for the protection and benefit of ·small manu·
f'\<;tqrers who npke Jund Jll>•:le shoc;s and cha ppals . of sma!!
.--..,,
a s.c.R.
SUPREME COURT REPORTS
705
value and are unable to compete with large-scale manufacturers
of footwear made on machines.
Such a classification in the
interests of small manufacturers is valid.
Orient Weawing Milla (P) Lta. v, Union of lnaia, [1962}
Supp. 3 S.C.R. 481 and British InrUa Corporation Ltdi, v,
The Collector of Central Excise, Allahabaa, [!963] 3 S,C.R. 642 ·
refe.rred,
The exemption creates no discrimination between footwear manufactured or produced in the· State and those
imported from outside and is not therefore hit by Art.304(a)
of the Constitution.
M/s, Ram Narain Sons Lta, v, Assistant Commisiion~r
of Sales Tax, [1935} 2 S.C.R. 483, held inapplicable.
CIVIL APPELLATE JuarsDICTION : Civil App-ia,l
No. 373 of 1961.
Appeal by special leave from the judgment
and order dated December l4:, 1959, of the Madhya
Pradesh High Court in Misc. Petition No. 274 of
1958.
B. Sen and I. N. Shroff, for the appellants.
W. S. Barlingay and A.G. Ratnapakhi, for the
respondents.
·
1962. August 24:. The Judgment of the Court
was delivered by
S.K.Das, J.-This is an appeal by special leave
from the judgment and order of the High Court of
Madhya Pradesh dated December 14:, 1959, by which
the said High Cou_rt quashed an assessment of sales
tax made against the respondent for the assessment
year 1956-57. The appellant before us are the State
of the Madhya Pradesh, the Commissioner of Sales
Tdx, Madhya Pradesh and the Sales Tax Officer,
Circle No.2, Indore.
·
We may first state the circumstances under
wl:iic4 the resrondent was a~3~3:rnd to sales tax: anq
1962
State of
Madhya P1ades/1
v.
Abdeali
Das.].
1982
St~te:o·j
Mlrdhy;a P1adis
v.
A.bi111di
Dci• J;
706.
SUPREME COURT REPORTS (1963]
the reasons for which the High Court quashed the
said assessment.
The respo

## Text

19.llB --
704
SGP·EtEME 001'RT &EPORTS [1963]
STATE OF MADHYA PRADESH
v.
AB1'EALT
(S. K. DAS,
J. L. KAPUR,
A. K. SARKAR,
M. HIDAYATULLAH and RMlHUBAR DAYAL, JJ.)
'
Inter-State Trade-Discrimination-Sales Tax-Exemption:_Bales of harul·made footwear by manufacturer~Madhya ·
JJharat Sales Tax Act, 1950 (M. B. 30 of 1950), s•. 4(3)-
~onstitution of lndia,.Art. 304(a).
•
The respondent, a dealer in imported hand-made shoes
and chappals, claimed exemption in respect of his sales turn:
over on the basis of the notification issued under s. 5 of the
Madhya Bharat Sales Tax Act which exempted hand-made
shoes and chappals the sale price of which did not exceed
Rs. 12/8[· in case of sale by the manufacturer or by a member
of his family. The claim for exemption was rejected by the
Sales Tax Officer and the respondent was assessed on the
total turnover. The respondent challenged the assessment by
a petition under Art. 226 before the Madhya Bharat High
Court which allowed the petition on the veiw that the
exemption granted by the notification applied to sales of
hand-made shoes, chappals, etc., whether made within or
outside the State and held that any other interpretation of
the notification would bring it into conflict with Art. 304(a)
of the Constitution.
Helil, that the notification lays down three conditions
for the grant of exemption: (I) that the sale must be of
such shoes, chappals etc., as are hand.made and not manufactured on power machine ; (2) that the sale price must not
exceed Rs. 12-8-0 per pair ; and (3) that the sale must be
by the manufacturer or any
membe1 of his family.
The
notification when it uses the expre~sion "in case of sale" has
reference to the taxable event in the State; in other words,
it refers to a sale in the State and not outside it.
Therefore
the notification has re:(ererice to such sales as would come but
for the exemption within item 32 of Schedule 3 of the
notification.
The interptetation put by the High Court
would obliterate one of the conditions and is not cOrrect.
Helrl,
further, that the
exemption granted by the
notification is for the protection and benefit of ·small manu·
f'\<;tqrers who npke Jund Jll>•:le shoc;s and cha ppals . of sma!!
.--..,,
a s.c.R.
SUPREME COURT REPORTS
705
value and are unable to compete with large-scale manufacturers
of footwear made on machines.
Such a classification in the
interests of small manufacturers is valid.
Orient Weawing Milla (P) Lta. v, Union of lnaia, [1962}
Supp. 3 S.C.R. 481 and British InrUa Corporation Ltdi, v,
The Collector of Central Excise, Allahabaa, [!963] 3 S,C.R. 642 ·
refe.rred,
The exemption creates no discrimination between footwear manufactured or produced in the· State and those
imported from outside and is not therefore hit by Art.304(a)
of the Constitution.
M/s, Ram Narain Sons Lta, v, Assistant Commisiion~r
of Sales Tax, [1935} 2 S.C.R. 483, held inapplicable.
CIVIL APPELLATE JuarsDICTION : Civil App-ia,l
No. 373 of 1961.
Appeal by special leave from the judgment
and order dated December l4:, 1959, of the Madhya
Pradesh High Court in Misc. Petition No. 274 of
1958.
B. Sen and I. N. Shroff, for the appellants.
W. S. Barlingay and A.G. Ratnapakhi, for the
respondents.
·
1962. August 24:. The Judgment of the Court
was delivered by
S.K.Das, J.-This is an appeal by special leave
from the judgment and order of the High Court of
Madhya Pradesh dated December 14:, 1959, by which
the said High Cou_rt quashed an assessment of sales
tax made against the respondent for the assessment
year 1956-57. The appellant before us are the State
of the Madhya Pradesh, the Commissioner of Sales
Tdx, Madhya Pradesh and the Sales Tax Officer,
Circle No.2, Indore.
·
We may first state the circumstances under
wl:iic4 the resrondent was a~3~3:rnd to sales tax: anq
1962
State of
Madhya P1ades/1
v.
Abdeali
Das.].
1982
St~te:o·j
Mlrdhy;a P1adis
v.
A.bi111di
Dci• J;
706.
SUPREME COURT REPORTS (1963]
the reasons for which the High Court quashed the
said assessment.
The respondent carried on the
business of importing and selling different types of
footwear in the State of Madhya Pradesh under the
name and style of Mun war 8hoe Company, Indore.
During the assessment year 1956-57 the taxable
turnover of the goods sold by the respondent was
determined to be 1t little over Rs. 60,000/-, and he
was assessed to sales tax on his taxable turnovor in
accordance with item 32Sob.3 of the notificatir>n dated
October 24, 1953 i88ued under s. 5 of the Madhya
Bharat Sales Tax Act, 1950 (Act 30 of 1950) (hereinafter referred to as the Act). Section 3 of the
Act is the charging section which imposes the tax.
Section 4(3) empowers the Government to grnnt
exemption by means of a notification in respect of
the sale of any goods or class of goods.
Section 5
of the Act fixes the rate of tax and states that the
tax payable by a dealer under the Act shall be a
single point. It permits the State Government to
notify the goods and the point of their sale at
which the tax is payable. Item 32 of Sch. 3 of the
notification referred to above was in theae terms.
S.No. ·
32
Name of goods
All leather goods
and all shoes,
ohappals (footweer)
eto.
Point of sale in_
Madhya Bharat
at which tax is
payable
Sale by importer
or manufacturer.
Though the item in question made all leather goJdi
and all shoes, chappal etc. liable to sales tax at the
point o~ sale by-the importer or mfanufa~turer, an
j.
exempt10n was granted in respect o certam sales of
"
footwear b;v meaμs ofnotifioa.tio~ issued ~nder a.
<I:
3 S.C.R.
SUPREME COURT REPORTS
707
(3} of the Act. We may now refer to these notifications. The first notification was dated May 27, 1955
and was in these terms:·
"In exercise of the powers conferred by
section 4(3) of Madhya Bharat Sales Tax Act,
Samvat 2007 the Rajpramukh has passed order
exempting from the payment of sales tax, all
such shoes, the selling price of which does not
exceed rupees ten per pair an<l such country
shoes which are prepared by the manufacturer himseif and for the production of which
power is not used in any stage if the same are
sold by the manufacturer himself or any member of his family."
This notification was later superseded by another
notification dated January 28, 1956, which read as
follows:
"In exercise of the powers conferred by
section 4, sub-section(3) of the-Madhya Bharat
Sales Tax Act, Samvat 2007 the Rajpramukh
in supersession of the notification No. 59( c )(t)
P.R. 412-54, dated 27-5-1955 of this department has exempted from the payment of sales
tax, in case of sale by the manufBi_cturer or
any member of his family, tbs sale of all such
· shoes,ohappals, country shoes and footwears
which are hand-made and which are not manufactured on power machine and whose sale
price does not exceed Rs. 12/8/-." .
The respondent qontended before the Sale Tax Officer that he was not liable to pay any sales tax on
· the sale of hand-made shoes, ohappal and other
type of footwear whose sale price did not exceed
Rs. 12/8/- per pair on the ground that such footwear
).\
was exempt from tax by reason of the notification
dated January 28, 1956. The Sales Tax Officer nega.-
H ved this contention. He ~ointed out in )lis order
1961
Stats of
Madb,ya Praduh
••
AbdeaJi
DaaJ.
1962
State of
MadhJ·a Pf"adesh
v.
Abdeali
DasJ.
708
SUPREME COURT Rh'PORTS (1963]
dated March 25, 1958 that the condition laid down
in the notification to the effect that the sale must
be by the manufacturer or any member of his
family was not fulfilled, and as the respondent was
an importer and dealer of footwear and not the
manufacturer or ·a member of the family of the
manufacturer, he was not entitled to claim any
exemption under the notification.
Consequently
the Sales Tax Officer passed an order asst"ssing
sales tax on the total turnover of the respondent.
The respondent then moved the High Court
of Madhya Prad~sh by means of a petition under
Art. 2:l6 of the Constituthn and in that petitiGm the
respondent said that the notification dated January
28, 1956, exempted from tax all sales of footwear
which fulfilled the following to conditions, viz., (a}
such footwear was hand-made and not manufactured on power machine, ·and (b} the sale price whereof
did not exceed Rs. 12/81- per pair. The respondent
further averred that if the exemption were held to
be in. favour of sales by a manufacturer or a member of his family and not sales by an importer,
then the notification would be discriminatory in
nature and would contravene the provisions of Art.
304 (a} of !he Constitution. On these grounds the
respondent prayed that the assessment order dated
March 25, 1958, be quashed and the Sales Tax
Officer be directed to exempt from tax such sales
by the respondent as were cqvered by the exemption granted by the notification dated January 28,
1956. In their reply to the writ petition the appellants pointed out that the notification dated January
28, 1956 did ilot in any way discriminate between
footwear manufactured or produced in the State of
Madhya Pradesh and footwear imported from outside, because the conditions laid down in the notification were equally .applicable to both types of
S,Oods anq o~e of tqese oo~qitjo~s was that ~he ·sale
•
3 s.c.:R.
SUPREME COURT REPORTS
709
which was to be exempted from tax must be by the·
manufacturer or a member of his· family.
The High Court accepted the petition of
the. respondent and held that the respondent's
contention that hand-made shoes, chappals and
footwear purchased by him directly from the
manufacturer
outside
the
State and imported
by him for sale
were entitled to
exemption
under the notification dated Janu11ry 28, 1956,
must prevail. The High Court said:
"What that notification does is to exempt .
from sales tax the sale of hand-made chappals
shoes, footwear and country shoes if the
price of the article sold does not exceed
Rs. 12-8/- and if it is sold by the manufacturer or any member of his family. It makes
no difference whether the sale is by the manufacturer within the State directly to the purchaser or whether it is by the manufacturer
outside the :state to the importer who then
sells it to the purchaser. The notification is,
no doubt, not dearly worded. x x x x x x
The notifieation has to be read in consonance
with the provisions of Article !304 of the Constitution. So read, it must be held that the
exemption applies to hand-made shoes, chappals etc .. whether made within or outside the
State if the other conditions mentioned in
the notification are satisfied."
_Accordingly,
the High Court quashed the
assessment dated March 25, 1958, and directed the
Sales Tax Officer to make a fresh assessment in the
light of the decision of the 'lHigh Court.
On behalf of the appellant!:! it has been contended before .us that.the interpretation which the
1962'
Stttl• of
Maihy• 'l"raitsh
'"
Abt/•ali
Das J.
Stat. oj
, Madhya Prodeslt
v.
4bd•ali
'
Das J.
7io
. '
•.
.
SUPREME COURT REPORTS [1963]
High Court p11t on the notification dated January
28, 1956, is not correct. We think that this contention is right and must be accepted, The notificatiJn clearly lays down three conditions for the grant
of exemption: one of the conditions is that the
sale must be of such shoes, chappals, country .shoes
and footwear as are hand-made and not manufactured on power machine; the second condition is·
that the sale price must not exceed Rs. 12/8/-; and
the third condition is that the sale must be by the
manufacturer or any member of his family.
The
notification when it uses the expression ''in case of
sale" must refer to the sale which is being exempted
from tax in thf' State; in other words, it has reference to tbe taxable event in the State as per ::>oh.
3 of the notification dated October 24, 1953. That
notification makes it clear that the tax is a single
point tax, and the taxable event is the sale by the
importer or manufacturer in the State. Therefore,
the expression "in case of sale" in the exemption
notification can have no reference to a sale outside
the State. The High Court was in error when it
said that, it made no difference whether tbe sale
was by the manufacturer within the State directly
to the purchaser or whether the sale was by the
manufacturer outside the State to the importer who ·
then sold the shoes to the purchaser in the i::ltate.
When a manufacturer sells shoes outside the State
to an importer and the importer again sells shoes
in the State, there are really two sales, one outside
the State and one inside it.
The sales outside the
State are not taxable under the Act and the notification of January 28, 1956, has no reference to
such sales. When the notification uses the expression "in case of sale by the manufacturer or a
member of his family';, it has reference to such
sales as would come but for the exemption within
item 32 of Sch. 3 of the notification dated October
24, 1953. If the interpretation put· by the High
3 S.C.R.
SUPREME COURT REPORTS
7ii
Court is correct, then the practical effect will be to
obliterate one of the conditions
laid down in the
notification, namely, that the sale, which is the
taxable event, must be by the manufacturer or any
member of his family .. We do not think that the
notification is capable of such an interpretation.
All the three conditions laid down in the notification must be fulfilled before the exemption referred
to therein can be claimed and we cannot, by interpretation, delete one of the conditions.
On the question whether the notification contravenes Art. 304(a) of the Constitution learned·
counsel for the appellants has canvassed before us
the larger question that Art. 304(a) has no reference to sales tax legislation. He has contended that
Art. 304(a) refers to a tax on goods meaning thereby a tax on the goods themselves, e.g. excise duty
or contervailing duty on goods, and it has no
reference to a tax on transactions· of sale.
In view of the alternative submissions which
learned counsel for the appellants has made and to
which we shall presently refer, it is unnessary for
us to deal with the aforesaid larger question in this .
appeal. The alternative
submissions made by
learned counsel for the appellants are these. Firstly,
learned counsel for the appellants had argued that
on the assumption that sales tax legislation is
contemplated by Art. 304:(a), the notification in
question does not in any way contravene that provisions of the said Article. He has rmbmitted thdt
the three conditions laid down by the notification
apply equally to both types of footwear, footwear
manufactured or produced in the State ond footwear imported from other States. Secondly, he
has submitted that if the notification in question
is bad on the ground that it contravenes the provisions of Art. ::lO(ut) of the Constitution, then the
191!
lilt•le ef ..
M 'Jtlh.1• · Pm.iJ11h
v.
At/("1i
l>11itJ.
1962
St,fe ,,j
Madhya Prade1li
.
v.
Abdeali
DasJ.
712
SUPREME COURT REPORTS i196:i]
result will be that the notification dated January
28, 1956, will be voic!.
This will not, however,
affect the validity of the notification of October 24,
1953, made under s. 5 of the Act, by which all,
leather goods and all footw<'ar are made liable to a
tax at the point of salo in the State by an importer
or manufacturer. Learned counsel has submitted
that the respondent is an importer who sells footwear in the State, and he will be liable to tax on
all footwear sold by him and will not be entitled to
claim any exemption if the exemption notification
is bad; in other words, the assessment will be the
same as has been found by the Sales Tax Officer by
his order dated March 25, 1958, and in that view
also, the . order of the High Court quashing the
assessment will be erroneous.
We now proceed to consider these alternati~e
submissions of learned counsel for the appellants.
We do not think that the notification dated
January 28, 1956 makes any such discrimination
between footwear manufactuued or produced in the
State of Madhya Pradesh and footwear imported
from other States as is prohibited by Art. 3U4(a) of
of the Constitution. We have already pointed out
that the exemption granted by the notification in
question depends on the fulfilmAnt of three conditions and all the three conditions are equally applicable to footwear manufactured or produced in the
State and footwear imported from other States. It
is obvious that the exemption is for the protection
and benefit of small manufacturers Who make handmade shoes of small value and who may be unable
to compete with large-scale manufacturers of footwear made on machines.
t:luch a classification in
the interests of small manufacturers has often been
made and upheld by this Court. (See Orient W raving Jllills (P) Ltd. v. The Union of India (1): and
The British India Corporation Ltd. v. The Collector of
Central Exeise, .Allahabad (2 ).
(I) (1962) supp. 3 s.c.R. 481.
(2) (1963) s s.c.a. 642•
a s.c.R.
SUPREME OOURT REPORTS ' 713
In the course of his arguments learned counsel for
respondent has firsh supported the, interpretation
put on the notification by the High Court. That
question we have already dealt with earlier in this
judgment.
Learned counsel for the respondent
has then submitted that the discrimination ariseri
·in the following way. He points out that a small
manufacturer outside the State has to travel into
the State and sell hand-made shoes there in order
·to get the benefit of the exemption whereas a small
manufacturer in the ·State has not to travel any-
. where in order to get the benefit of the exemption.
This, learned counsel haq submitted, results in such
discrimination aR is forbidden by Art. 304(a) of the
Constitution. We do not agree. The argument of
learned ·counsel for the respondent is really an
, argument of inconvenience.
The exemption by
;itself creat!IS no discrimination between footwear
;manufactured or produced in the State and imported
from outside. Even a small manufacturer in the
State must
fulfil the conditions laid down by .
, the notifi,.ation in question before he oan claim
exemption from tax; in other words, he or a mem-
. her of his family· must also sell the hand-made
shoes before he can claim the exemption. So must
., a. small manufacturer outside the State if he wants
to claim the benefit of the exemption. Unless he
has travelled and brought the 1zoods into another
St&te, Art, 304(a) does not apply ; hence he cannot
complain under that Article that he has to travel.
It is worthy of note that the exemption relates to
sales in the State and that is why a small munufacturer outside the State can olaim no benefit of
the exemption with regard to sales out side the
. State ·which are not taxable under the· Act. It is
necessary here to refer to one other point which
has been urged by learned counsel for the respondent. Learned counsel has pointed out that. the
word 'himself' used in the earlier notification of
196Z
Slat• of
JI adhya 'Praduh
1',
Ab~eali
Das J,
19~2
Stall •f
JI •ih:1• Pradesh
v •
. 4bd1ali
· 714
1
SUPREME OOURT REPOR'fS [1963]
May 27, 1955, in connection with the word 'manufacturer' has been omitted from the later notification January 28, 1956, and he has contented that
by reason of the omission of the word 'himself' the
benefit of the later notification may be avaliable
to a servant or an agent of the manufacturer. We
do not think that this question falls for decision in
the present appeal. The respondent in the present
case is neithter a servant nor an agent of the manufacturer. It is admitted that he is merely an
importer and in hie case nothing turns upon the
omission of the word 'himself' from the later notification.
We also-agree with the alternative submission
of learned counsel for the appellants t4at if the
notification dated January 28, 1956 is bad, then
the respondent sta.nds to gain nothing.
If the
exemption notification is struck down as invalid,
that will not affect the validity of the notifica.tion
of October 24, 1953, pa.rtioularly of item 32 of
Sch. 3 thereof. Learned counsel for the respondant
has submitted that the two notifications must be
read together and if the exemption goes, the notification of October 24, 1953, issued under s. 5 of the
Act must also go. We are unable to agree. The
notification of October 24, 1953. fixe1 the point of
sale at which the tax is to be imposed. The rate of
tax is fixed by s. 5 of the Act. There is no reason
why the notification dated October 24, 1953, should
fall with the notification dated January 28, 1956
.which was issued under s. 4(3) of the Act.
The
principle laid down by this Court in M/s Ram
Narain Sons of Ltd. v. Assistant Oommisstoner of
Sales Tux (1) that where an assessment consists of
a single undivided sum in respect of the . totality of
the property treated as assessable, the wrongful
inclusion in it of certain items of property which -~
(I) [1955] 2. S. C.R. 483.
'
3 S.C.R.
SUPREME COURT REPORTS
715
by virtue of a. provision of law were . expressly
exempted from taxation, renders the assessment
invalid in toto, will not apply in the. present t1ase
for.· the simple reason that there is no wrongful
inclusion of any item in the assessment order. If
the exemption goes, then the respondent has been
rightly assessed on his total turnover. It is only
when the respondent is entitled to the . exemption
claimed that he can say that the assessment is bad
and must be qua.shed. The resdondent oa.n claim
the exemption only if the interpretation put by the
High Court on the notification dated January 28,
1956, is accepted as correct, If that interpretation
. is not correct, then this appeal must be allowed
even if the notification is baa· by reason of the
provisions of Art. 304(a) of the Constitution.
For the reasons given above, we would allow
the appeal, set· aside the judgment and order of the
High Court dated December 14, 1949 and dismiss
the writ petition. The appellants will be entitled
to their costs throughout.
Appeal allowed .
• J
'f
1111
.~1a1, Q.f
JI odh.JO Prat/uh
v •
.4.b.UO"
D°' .J.