# STATE OF U.P. AND ANR v. ANNAPURNA BISCUIT MFG. CO

- **Citation:** [1973] 3 S.C.R. 987
- **Court:** Supreme Court of India
- **Decided:** 1973-04-16
- **Bench:** K. S. Heode, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-u-p-and-anr-v-annapurna-biscuit-mfg-co-6598
- **Pages:** 7

## Headnote

U.P, Sat .. Tax Act 1947 s. 29-A-Yalldity-U.P. Salta Tax (Amtnd•
mint&: Ya/ldatlon)Act 1971 Ss. IS and 17-Stction IS lns1rtlng s. 29·A
Into parent Act-Stctlon 17 making constqutntlal provlslon,,_Yalidlty of
Ss. IS and 17-State Legislature whtthtr has compttene< lo enact law
enforcing dtposlt of monty wrong~v reallstd by dtaler as sales.tax-Such
law whtthtr covtrtd by Constitution of India, Sevenrh Schedule, entry
54 List 11 or entries 7 and 10' List Ill.
By s. 29-A of the U.P. Sales Tax Act 1948 inserted by s. 15 of th.e
U.P. Sales Tax (Amending and Validation) Act 1971 sales-tax wrongly
realised by a dealer from any person had to be deposited in IM Govern·
ment Treasury. It would be held in trust by the Government on behalf
of such person and refunded to him if application for that purpose was
made within a period laid down in the section. Section 17 of the Amend·
ing Act contained consequential and validating provisions.
The
High
Court of Allahabad in petitions filed by the respondents
held that the
State Legislature had no competence to enact a provision like s. 29-A and
therefore its enactment was unconstitutional.
Consequently s. 17 of the
Amending Act was also unconstitutional.
Dismissing the appeal filed by the State,
HELD : (i) The argument that provision like section 29-A is ancillary
or incidental to the collection of tax legitimately due under a law made
under entry 54 has no force in view of this Court's decision in Abdul
Quader's case and in Ashoka Marketing Ltd., wherein provisions similar
to s. 29-A were held not to fall under entry 54 of List II. [991 DJ
· (ii) The impugned law could not also be held to fall under. entry 7
List III which relates to contracts. A similar argument was rejected by
this Court in Ashoka Marketing Ltd. (992 G]
(iii) The impugned law could not be said to relate to trusts so as to
fall under entry I 0 of List Ill. A law compelling deposit of money
m-ongly realised as sales~tax ·cannot in pith and substance be considered
to be a law relating to trusts. [993 BJ
(iv) S. 17 was linked with s. 15 and could not exist independently of
that section. The High Court rightly held it to be unconstitutional.
Abdul Quarder and Co. v. Sales Tax Officer, Hyderabad, (1970] 25
S.T.C. 155 and Ashoka Marketing Ltd. v. State of Bihar and Another,
[1970] 26 I.T.R. 254, applied.

## Text

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987
STATE OF U.P. AND ANR.
v.
ANNAPURNA BISCUIT MFG. CO.
April 16, 1973
[K. S. HEODE AND H. R. KHANNA, JJ.]
U.P, Sat .. Tax Act 1947 s. 29-A-Yalldity-U.P. Salta Tax (Amtnd•
mint&: Ya/ldatlon)Act 1971 Ss. IS and 17-Stction IS lns1rtlng s. 29·A
Into parent Act-Stctlon 17 making constqutntlal provlslon,,_Yalidlty of
Ss. IS and 17-State Legislature whtthtr has compttene< lo enact law
enforcing dtposlt of monty wrong~v reallstd by dtaler as sales.tax-Such
law whtthtr covtrtd by Constitution of India, Sevenrh Schedule, entry
54 List 11 or entries 7 and 10' List Ill.
By s. 29-A of the U.P. Sales Tax Act 1948 inserted by s. 15 of th.e
U.P. Sales Tax (Amending and Validation) Act 1971 sales-tax wrongly
realised by a dealer from any person had to be deposited in IM Govern·
ment Treasury. It would be held in trust by the Government on behalf
of such person and refunded to him if application for that purpose was
made within a period laid down in the section. Section 17 of the Amend·
ing Act contained consequential and validating provisions.
The
High
Court of Allahabad in petitions filed by the respondents
held that the
State Legislature had no competence to enact a provision like s. 29-A and
therefore its enactment was unconstitutional.
Consequently s. 17 of the
Amending Act was also unconstitutional.
Dismissing the appeal filed by the State,
HELD : (i) The argument that provision like section 29-A is ancillary
or incidental to the collection of tax legitimately due under a law made
under entry 54 has no force in view of this Court's decision in Abdul
Quader's case and in Ashoka Marketing Ltd., wherein provisions similar
to s. 29-A were held not to fall under entry 54 of List II. [991 DJ
· (ii) The impugned law could not also be held to fall under. entry 7
List III which relates to contracts. A similar argument was rejected by
this Court in Ashoka Marketing Ltd. (992 G]
(iii) The impugned law could not be said to relate to trusts so as to
fall under entry I 0 of List Ill. A law compelling deposit of money
m-ongly realised as sales~tax ·cannot in pith and substance be considered
to be a law relating to trusts. [993 BJ
(iv) S. 17 was linked with s. 15 and could not exist independently of
that section. The High Court rightly held it to be unconstitutional.
Abdul Quarder and Co. v. Sales Tax Officer, Hyderabad, (1970] 25
S.T.C. 155 and Ashoka Marketing Ltd. v. State of Bihar and Another,
[1970] 26 I.T.R. 254, applied.
CIVIL APPELLATE JURISDICTION :
Civil Appeal No. 1716
of \972.
Appeal by certificate from the judgment and order dated
November 11, 1971 of the Allahabad High Court in Civil Misc.
Writ Nos. 3716 of 1970.
988
SUPREME COURT REPORTS
[1973] 3 s.c.a.
S. N. Kachar, N. D. Karkhanis, K. C. Agarwala and O. P.
A
Rana, for the appellants.
Yogeshwar Prasad, S. K. Bagga and S. Bagga,
pondents.
The Judgment of the Coun was delivered by
for tlle res·
'
KHANNA, J. This appeal by certificate is directed against the
judgment of Allahabad High Court whereby that court held the
provisions of section 29-A of the U.P. Sales Tax (Act 15 of 1948)
(hereinafter referred to as the principal Act) inserted by section
15 of the U.P. Sales Tax (Amendment and Validation) Act, 1971
(Amendment Act of 1971) hereinafter referred to as the Amending Act) as well as section 17 of the Amending Act to be unconstitutional.
This Court in the case of Commissioner of Sales Tax v. Ganga
Sugar Corporation Ltd.(') held that section 8-A
( 4) of the
principal Act was ultra vires the State Legislature : SeCtion 8-A
( 4) read as under :
"8-A(4). Without prejudice. to the provisions of
clause (g) of sub-section (2) of section 14, the amount
realised by any person as tax on sale of any goods shall,
not withstanding anything contained in any other
provision of this Act, be deposited by him in a Government treasury within such period as may be pres.cribed,
if the amount so realised exceeds the amount payable as
tax in respect of that sale or if no tax is payable in res.
pect thereof."
The Court in that context relied upon the decision in Abdul
Quader and Co. v. Sales Tax Officer, Hyderabad. (2 ) it was held
in Abdul Quader's case that the State Legislature in making a
similar provision, viz., section 11(2) in the Hyderabad General
Sales Tax Act, could not be regarded as having directly legislated
for the imposition of sales and purchase tax under entry 54 List
II in the Seventh Schedule to the Constitution because the amount
thougl} collected by way of tax was not exigible as tax under the
law. It was observed :
"We do not think that the ambit of ancillary or incidental power goes to the extent of permitting Legislature
to provide that though the amount collected-may be •
wrongly-by way of tax is not exigible under the law
as made under the relevant taxing entry, it shall still be
paid over to Government, as if it were a tax."
(1) [1970] 2S S. T. C.
ISS.
(2) [19641 IS S. T. C. 403.
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U.P. STATE V. ANNAPURNA BISCUIT CO, (Khanna, J.)
989
In 1969 the Uttar Pradesh Taxation Amendment Act, 1969
(U .P. Aot 11 of 1969) was passed. Section 17 of that Act inserted
section 29-A which read as under:
"29-A.-Refund in special cases.
Notwithstanding anything contained in this Act or in
any other law for the time being in force or in any judgment, decree or order of any court, where any amount is
either deposited or paid biY any dealer or other person
under sub-section (4) or sub-section (5) of section 8-A,
such amount or any part thereof shall on a claim being
made in that behalf in such form
and within such
period as may be prescribed, be refunded to the person
from whom such dealer or the person had actually realised such amount or part, and to no other person."
On August 22, 1971 the Amending Act was published. A number
of amendmell'ls were made by the Amending Act in the principal
Act. By section 10 of the Amending Act, sub-section ( 4) and
( 5) of section 8-A were omitted.
Section 15 of the Amending
Act was as under:
"15. For section 29-A of the principal Act, the following
section shal) be substituted, llJlmely :-
"29-A. ( 1) Where any amount is realised from any ·
person by any dealer purporting to do so by way of
realisation of tax on 1he sale of any goods to such
person, such dealer shall deposit the entire amount so·
realised into the Government Treasury, wit;hin such
period as may be prescribed notwithstanding that the
dealer is not liable to pay such amount as tax or that
only a part of it is due from him as tax under this Act,
(2) Any amount deposited by any dealer under subsection ( 1) shall, to the extent it is not due as tax, be
held by the State Government in trust for the person
from whom it was realised by the dealer, or for his legal
representatives, and the deposit shall discharge
such
dealer of the liablity in respect thereof the extent of the
deposit.
( 3) Where any amount is deposited by any dealer
under sub-section ( 1 ) , such amount or any :Qart thereof
shall, on a claim being made in that behalf in such form
as may be prescribed, be refunded, in the manner pr~
cribed, to the person from whom such dealer had ac_tua!ly
realised such amount or part, or to his legal representatives, and to no other person.
990
SUPREME COURT REPORTS
[1973] 3 S.C.R.
Provided that no such claim shall be
entertained
after the expiry of three years from the date of the order
of asse~ment or one year from the date of the final order
on appeal, revision or reference, if any, in respect thereof,
whichever is later.
Explanation-The expression 'final order on appeal,
'revision or reference' includes an order passed by the
Supreme Court under Article 32, Article 132, Article
133, Article 136 or Article 137, or by the High Court
under Article 226 or Article 227 of the Constitution."
Section 17 contains transitional provisions for deeming and validation consequent upon the deletion of sub-sections ( 4) and ( 5)
of Section 8-A and the substitution of section 29-A in the principal Act.
·
The dispute relates to the amount which a dealer wron~Jy
realises as sales tax from the customer and the question whtch
arises for consideration is whether a State Legislature has the
legislative competence to pass a law for the deposit of that amount
in the Government Treasury. In other words, is there any entry
in List 11 or List III of the Seventh Schedule to the Constitution
under which the State Legislature could make such a Jaw? So far
as section 17 of the Amending Act is concerned, the High Court
observed that 1his section was dependent upon and interrelated
with section 15 of the Amending Act. Sectton 17 provides that
the amount already deposited under section 8-A ( 4) of the principal
Act shall be deemed to be under section 29-A as substituted bv
section 15 of the Amending Act.
Section 15 is the
principal
provision, while section 17 is an ancillary provision. If section
15 was unconstitutional, section 17 would also share the same
fate and would have to be struck down as unconstitutional because
it is linked with section 15 and cannot exist independently of that
section.
Learned Advocate General appearing for the appellant
State has not, and in our opinion, rightly challenged the correctness of the view taken by the High Court in this respect.
We may now deal with the provisions of secdon 15 of the
Amending Act as a result of which section 29-A was substituted
in lieu of the old section 29-A in the principal Act. Section 29-A
deals with the amount wrongly realised 1fy a dealer on sale of
goods to any person.
Sub-section (I) of section 29-A of th~
Principal Act makes it obligatory on the part ol' the dealer to
deposit such amount into the Government Treasury "notwithstanding: 1hat the dealer is not liable to pay much amount as tax or that
only a part of it is due from him as tax under this Act." Subsection ( 2) provides that the amount so deposited by a dealer shall
to the extent it is not due as tax from him be held by the State
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U.P. STATE v .. ANNAPURNA BISCUIT co. (Khanna, J.)
991
Government in trust for the person from whom it was realised by
the dealer or for his legal representatives. It further provides
that when a dealer has deposited the amount into .the Treasury, he
shall no longer be liable to the person from whom he has realised
the amount.
According to sub-section (3) of the section, the
amount deposited into the Government Treasury by the dealer or
any part thereof shall, on a claim being made in that behalf in
such manner and form as may be prescribed, be refunded to the
person from whom the dealer had actually realised the amount or
part, or to his legal representatives.
Section 29-A thus seeks
to ensure the deposit into the Government Treasury of the amount
by a dealer as has been wrongly realised by him as sales tax. AJ
the said amount does not constitute sales tax, it is not covered
by entry 54 in List II of the Seventh Schedule to the Constitution
which rel!l'les to taxes on sale or purchase of goods other than
newspapers subject to the provision of entry 92-A of List I.
The arugment that provision like section 29A is
ancillary
or incidental to the collection of tax legitimately due under '' law
made under entry 54 has no force. Such an argument was rejected
by this Court in Abdul Quader's case (supra) in the following
words:
"The provision however is attempted to be justified
on the ground that though it may not be open to a State
Legislature to make provision for the recovery of an
amount which is not a tax under entry 54 of List II in
a law made for that purpose, it would still be open
to the Legislature to provide for paying over all
the
amounts collected by way of tax by persons, even though
they really are not exigible as tax, as part of the incidental and encillary power to make provision for the
levy and collection of such tax-But where the legislation under the relevant entry proceeds on the basis that
the amount concerned is not a tax exigible under the law
made under that entry, but even so
lays down that
though it is not exigible under the law, it shall be paid
over to Government, merely because some dealers by
mistake or otherwise have collected it as tax, it is difficult to see how such a provision can be a.ncillary or
incidental to the collection of tax legitimately due under
a law made under the relevant taxing entry."
The above observations were quoted with approval by a six·
Judge Bench of this Court in the case of Ashokq Marketing Ltd.
v. State of Bihar and Another('). In that case the provisions of
section 20 A of the Bihar Sales Tax Act which were substantially
(!) (19701 26 I. T. R. 254.
992
SUPREME COURT REPORTS
[1973] 3 S.C.R;
similar to those of section 2 9-A now inpugned before us, were
assailed. Shah J. (as he then was) speaking for the Court observed:
I
"A provision which enables the dealer to pass on the
liability for payment of tax is incidental to legislation for
sales tax.
But we are unable to hold that a provision
under which a dealer is called upon to pay to the State
an amount which has been collected by him on a representation-express or implied-that an equal amount
is payable by him under the Bihar Sales Tax Act, is a
provision incidental to the power to levy 'tax on sale or
purchase of goods' within the meaning of entry 54 List
II of the Seventh Schedule.
Entry 54, List II, of the
Seventh Schedule comprehends the power to impose
tax, to prescribe machinery for collecting the tax, to
designate officers by whom the liability may be imposed
and to prescribe the authority, obligation and indemnity
o.f the officers. The State Legislature may under entry
54, List II, be competent to enact a law in respect of
matters necessarily incide!llal to 'l\ax on the sale and
purchase of goods'. But a provision compelling a dealer
who has deliberately or erroneously
recovered
an
amount from the purchaser on a representation that he
is entitled to recover it to recoup himself for payment
of tax, to pay over that amount to the State cannot, in
our .iudgment, be regarded as necessarily incidental to
lavying an
amount
as
tax which the State is
incompetent to levy. A mere device cannot be permitted
to defeat the provision of the Constitution by clothing
the claim in the form of a demand for depositing the
money with the State which the dealer has collected, but
which he was not entitled to collect."
In view of the above decision, the contention that the impugned
Act would be covered by entry 54 in List II can plainly be not
accepted.
Argument has been advanced before us on behalf of
the
appellant that the impugned law would be covered by entry 7 in
List III which relates, inter alia, to contracts.
A similar argument
was advanced in the case of Ashoka Marketing Ltd. (supra) and
was rejected in the follawing words :
"We fail to appreciate how power to legislate in
respect of entries 6, 7 and 13 would authorise the State
Legislature to legislate in respect of recovery from the
dealer of an amount wl!.ich the dealer was in law not
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U.P. STATE v. ANNAPUllNA BISCUIT CO', (Khanna, 1.)
993
entitled to collect, but which he has collected.
The
power to legislate in respect of sub-section ( 3), ( 4)
and ( 5) of section 20A does not fall under entries 6, 7
and 13 of List III expressly, nor can it lie said that the
power to legislate ls necessarily incidental to the power
contained in entries 6, 7 and 13 of List III."
Lastly, it has been argued that the law in question relates to
trust and can be justified under entry 10 in List III. We, however,
fail to see as to how such a law can be said to relate lo trusts. A
trust is an obligation annexed to the ownership of property and
arises .out of confidence reposed in and accepted by the owner
or declared and accepted by ·him for the benefit of another or of
C
another and the owner(see section 3 of tbe Indian Trusts Act,
1882). It is plain that a law compelling deposit of money wrongly
realised as sales tax cannot in pith and substance be considered
to 1* a law relating to trusts. The mere use of the word "11'.Ust"
in sub-section (2) of section 29-A would not make the impugned
law to be one relating to trusts.
f)
The appeal consequently fails and is dismissed with costs.
o.c.
Appeal dismissed.