# ' \ THE SUPREME COURT REPORTS M/S. J. K JUTE i\IILLS CO. LTD v. THE STATE OF UTTAR Pl{ADESH AND ANOTHER

- **Citation:** [1962] 2 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Writ Petition No. 108 of 1961
- **Bench:** S. K. Das, J. L. Kapur, M. Hidayatullah, J. C. Shah, T. L. VENKATARAMA AlYAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-supreme-court-reports-m-s-j-k-jute-i-iills-co-ltd-v-the-state-of-uttar-pl-2247
- **Pages:** 16

## Headnote

Sales Tax-Enactment enabling Government to fix rate of tax
by notification-Notification declared invalid by court-Enactment
validating notification-Retrospective operation-Validity of enactment-U. P. Sales Tax (Validation) Act, I958 (U. P. IS of 1958),
s. 3-U.P. Sales Tax Act, 1948 (U.P. r5 of I948), s. 3A-Constitution of India, Seventh Schedule, List II. Entry 54.
In exercise of the power conferred by s. 3A(2) of the U.P.
Sales Tax Act, r948, which enabled the State Government, by
notification, to fix the rate of the tax to be levied on the sales
of goods specified in the section not exceeding nine pies per
rupee, the Government issued a notification dated June 8, r94S
imposing a tax of six pies in the rupee on sales of jute. On
March 31, r956, the Governor of Uttar Pradesh issued an Ordinance, inter alia, amending s. 3A(2) of the Act, the effect of which
was to enact one ceiling rate of one anna per rupee on the sale
proceeds for all goods leaving it to the State to fix within the
ceiling such rates of tax for such goods as it might determine.
On the same date the Government issued a notification by which
sales on jute were liable to pay sales tax at the rate of one anna
per rupee on the sale proceeds. The Ordinance was replaced by
U.P. Sales Tax (Amendment) Act, 1956, under which the amended section shall "be deemed to have effect on and from April l,
1956". One of the dealers who had been assessed to sales tax in
accordance with the notification filed an application under
Art. 226 of the Constitution of India, calling in question its validity, and the High Court of Allahabad held that there was no
power in the State to issue the notification under s. 3A(2) on
M.arch 31, 1956, as that section was itself to come into force only
on April 1, 1956. With a view to remove the defect pointed out
in said decision, the State Legislature passed the U.P. Sales Tax
(Amendment) Act, 1957. but this in turn having been declared
by the Allahabad High Court not being effective in saving the
notification, the legislature ultimately enacted ·the U.P. Sales
Tax !Validation) Act, 1958. Section 3 of this Act provided that
notwithstanding any Judgment of any court the notification
dated March 31, 1956, shall be deemed to have been issued in
exercise of the powers conferred bys. 3A of the U.P. Sales Tax
Act, 1948, as if the said section was in force on the date on
April r7.
I96I
]. l(. jute
JYJUls Co Ltd.
State of
Uttar Pradesh
2
SUPREME COURT REPORTS
[1962]
which the notification was issued in the form in which it was in
force immediately before the commencement of this Act. The
petitioner who was carrying on business in the manufacture and
sale of jute goods filed an application under Art. 32 of the Constitution and contended that the Validation Act of r958, had
not brought about any change in the situation on the grounds
(I) that the words "in the form in which it was in force immediately before the commencement of this Act" ins. 3 must
be read as qualifying the word "notification" and not the word
"section" and in that view the notification in question was subject to the same infirmity which attached to it when it was
published on March 3r, r956, and (2) that the State Legislature
was not competent to enact a law imposing sales tax retrospectively and therefore the Validation Act was ultra vires.
Held: (r) that on its proper construction, the words "in the
form in which it was in force immediately before the commencement of this Act" ins. 3 of the U.P. Sales Tax (Validation) Act,
1958, qualify the word "section" and not the word "notification",
and that on that view the impugned notification was within the
saving clause of the Validation Act.
H. L. M. Biri Works v. Sales Tax Officer, A.I.R. r959 Ail.
208, approved.
(2) that the power of a legislature to enact a law with reference to a topic entrusted to it is unqualified and that in the
exercise of such a power it will be competent for the legislature
to enact a law which is either prospectiv

## Text

'
\
THE SUPREME COURT REPORTS
M/S. J. K .. JUTE i\IILLS CO. LTD.
v.
THE STATE OF UTTAR Pl{ADESH
AND ANOTHER
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J. C. SHAH and T. L. VENKATARAMA AlYAR, JJ.)
Sales Tax-Enactment enabling Government to fix rate of tax
by notification-Notification declared invalid by court-Enactment
validating notification-Retrospective operation-Validity of enactment-U. P. Sales Tax (Validation) Act, I958 (U. P. IS of 1958),
s. 3-U.P. Sales Tax Act, 1948 (U.P. r5 of I948), s. 3A-Constitution of India, Seventh Schedule, List II. Entry 54.
In exercise of the power conferred by s. 3A(2) of the U.P.
Sales Tax Act, r948, which enabled the State Government, by
notification, to fix the rate of the tax to be levied on the sales
of goods specified in the section not exceeding nine pies per
rupee, the Government issued a notification dated June 8, r94S
imposing a tax of six pies in the rupee on sales of jute. On
March 31, r956, the Governor of Uttar Pradesh issued an Ordinance, inter alia, amending s. 3A(2) of the Act, the effect of which
was to enact one ceiling rate of one anna per rupee on the sale
proceeds for all goods leaving it to the State to fix within the
ceiling such rates of tax for such goods as it might determine.
On the same date the Government issued a notification by which
sales on jute were liable to pay sales tax at the rate of one anna
per rupee on the sale proceeds. The Ordinance was replaced by
U.P. Sales Tax (Amendment) Act, 1956, under which the amended section shall "be deemed to have effect on and from April l,
1956". One of the dealers who had been assessed to sales tax in
accordance with the notification filed an application under
Art. 226 of the Constitution of India, calling in question its validity, and the High Court of Allahabad held that there was no
power in the State to issue the notification under s. 3A(2) on
M.arch 31, 1956, as that section was itself to come into force only
on April 1, 1956. With a view to remove the defect pointed out
in said decision, the State Legislature passed the U.P. Sales Tax
(Amendment) Act, 1957. but this in turn having been declared
by the Allahabad High Court not being effective in saving the
notification, the legislature ultimately enacted ·the U.P. Sales
Tax !Validation) Act, 1958. Section 3 of this Act provided that
notwithstanding any Judgment of any court the notification
dated March 31, 1956, shall be deemed to have been issued in
exercise of the powers conferred bys. 3A of the U.P. Sales Tax
Act, 1948, as if the said section was in force on the date on
April r7.
I96I
]. l(. jute
JYJUls Co Ltd.
State of
Uttar Pradesh
2
SUPREME COURT REPORTS
[1962]
which the notification was issued in the form in which it was in
force immediately before the commencement of this Act. The
petitioner who was carrying on business in the manufacture and
sale of jute goods filed an application under Art. 32 of the Constitution and contended that the Validation Act of r958, had
not brought about any change in the situation on the grounds
(I) that the words "in the form in which it was in force immediately before the commencement of this Act" ins. 3 must
be read as qualifying the word "notification" and not the word
"section" and in that view the notification in question was subject to the same infirmity which attached to it when it was
published on March 3r, r956, and (2) that the State Legislature
was not competent to enact a law imposing sales tax retrospectively and therefore the Validation Act was ultra vires.
Held: (r) that on its proper construction, the words "in the
form in which it was in force immediately before the commencement of this Act" ins. 3 of the U.P. Sales Tax (Validation) Act,
1958, qualify the word "section" and not the word "notification",
and that on that view the impugned notification was within the
saving clause of the Validation Act.
H. L. M. Biri Works v. Sales Tax Officer, A.I.R. r959 Ail.
208, approved.
(2) that the power of a legislature to enact a law with reference to a topic entrusted to it is unqualified and that in the
exercise of such a power it will be competent for the legislature
to enact a law which is either prospective or retrospective.
Accordingly, the Validation Act is not ultra vires the powers of
the legislature under entry 54 in List II of the Seventh Schedule
to the Constitution, for the reason that it operates retrospectively.
The fact that the seller is not in a position to pass the
sales tax on to the consumer does not affect the competence of
the legislature to enact a law imposing a sales tax retrospectively as that is a matter of policy.
The Province of Madras v. Boddu Paidanna and Sons, [1942]
F.C.R. go, explained.
The Tata Iron & Steel Co., Ltd. v. The State of Bihar, [1958)
S.C.R. 1355, Buchirajalingam v. State of Bihar, A.LR. 1958 S.C.
756 and M.P.V. Sundararamier & Co. v. The State of Andhra Pradesh, [r958] S.C.R. 1422, followed.
The Union of India v. Madan Gopal Kabra, [1954] S.C.R.
541, relied on.
ORIGINAL JURISDICTION: Writ Petition No. 108 of
1961.
Writ Petition under Art. 32 of the Constitution of
India for the enforcement of Fundamental Rights.
•
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2 S.C.R. SUPltEME COURT REPOHTS
3
1.1. 0. Setalvad, Attorney-Genera,! of India, Rameshwar Nath, S. N. Andley and P. [,. Vohra, for the
petitioner.
0. K. Daphtary, Solicitor-Geneml of India, K. L.
Misra, Advocate-General, U.P., I\.. Ti. Asthana and
0. P. Lal, for the respondents.
1961.
April 17.
The Judgment of the Court was
delivered by
]. K, Jute
lv!ills Co. Ltd.
v.
State of
Uttar l)radesh
VENKATARAMA AIYAR, J. -The petitioner is a
VeHkatarallla
company incorporated under the Indian Companies
Aiyar J.
Act, its registered office being at Kanpur in the
State of Uttar Pradesh, and it is carrying on business
in the manufacture and sale of jute goods.
By a
notification dated March 31, 1956, the State of Uttar
Pradesh imposed a tax of one anna in the rupee on
the sale proceeds of jute. Previously thereto, the tax
payable on sale of jute was six pies in the rupee. This
notification having been struck down by the High
Court of Allahabad as unauthorised and inoperative,
the State legislature enacted the U. P. Sales Tax
(Validation) Act, 1958 (U. P. Act XV of 1958), hereinafter referred to as the Validation Act, validating the
said notification as from March 31, 1956. In this
petition filed under Art. 32 of the Constitution, the
petitioner contends that notwithstanding the Validation Act, the notification in question continues to be
void and inoperative, because it has not in fact been
validated, and because the Act itself is ultra vires.
The impugned notification was, it may be mentioned,
superseded by a fresh notification on August 1, 1956,
and tho present dispute relates only to the tax on
sales effected between April l, 1956, and .July 31,
1956. If the Validation Act is intra vires, the tax
payable by the petitioner would, in accordance with
the impugned notification, be R8. 1,26,529-3-0, whereas if the said Act is ultra vires, the tax would be
reduced by half.
Though the point for decision is a simple one lying
within a narrow compass, to reach it one has to wade
through a perfect morass of statutes, notifications and
judicial pronouncements. \Ve begin with what has
]. I<. Jule
Mills Co. Ltd.
v.
State of
Uttar Pradesh
Venkatarania
Aiyar ].
4
SUPREME COURT REPORTS
(1962]
been termed the "Principal Act" by which sales tax
was imposed in the Province. That is the U. P. Sales
Tax Act No. XV of 1948, and that came into force on
April 1, 1948. There were subsequent amendments
to it in 1948, 1950 and 1952, but they are not material
for the present discussion. It is sufficient to refer to
s. 3-A as it stood on March 31, 1956, when the notification in question was issued. ThiK section ran as
follows:
"3-A. Single point taxation-( I) Notwithstanding
anything contained in Seetion 3, the State Government may by notification in tho offici:tl Gazette
declare that the turnover in respect of any goods or
class of goods shall not be liable to tax except at
such single point in the se~ies of sales by successive
dealers as the State Government may specify.
(2) If the State Government makes a declaration
under sub-section (I) of this section, it may further
declare that the turnover of the dealer, who is
liable to pay tax on the sale of such goods, shall in
respect of such sales, be taxed at such rate as may
be specified not exceeding one anna per rupee if the
sale relates to goods specified below:-
(i) Motor vehicles including motor cars, motor
taxi-cabs, motor cycles and cycle combinations,
motor scooters, motorettes, motor omni-buses, motor
vans and motor lorries. Chassis of motor vehicles.
Articles including rubber and other tyres and tubes
and batteries adapted for use as motor part and
accessories of motor vehicles, not being such articles as are ordinarily also used for other purposes
than as parts of accessories of motor vehicles.
(ii) Refrigerators and air conditioning plants.
(iii) (a) Wireless reception instruments, apparatus
and component parts thereof, including all electrical valves, accumulators, amplifiers and loudspeakers which are not specially designed for purposes
other than wireless reception.
(b) Radiogramophones.
(iv) Cinematographic, photographic and other
cameras, projectors and enlargers and films, plates,
papers and cloth required for use therewith.
•
'
2 S.C.R. SUPREME COURT REPORTS
5
(v) Scents and perfumes,
and nine pies per rupee if it relates to any other
goods."
It was under this provision that the U. P. Government had issued a notification on June 8, 1948, imposing a tax of six pies in the rupee on the sale of jute.
In exercise of the power conferred by Art. 213(1) of
the Constitution, the Governor of U ttar Pradesh
issued on March 31, 1956, Ordinance No. IX of 1956,
and that was published in the Official Gazette on the
same date. Under this Ordinance the whole of subsection (2) of s. 3-A as it then stood was deleted and
the following substituted:-
"(2) If the State Government irn1kes a declaration
under sub-section (1), it may further declare that
the turnover in respect of such goods shall be liable
to tax at such rate not exceeding one anna per rupee
as may be specified."
The effect of this provision was to enact one ceiling
rate of one anna per rupee on the sale proceeds for all
goods leaving it to the State to fix within the ceiling
such rates of tax fat, such goods as it might determine.
On the same date, the Government published the
following notification No. ST. 905/X on which the
entire controversy has arisen.
"In exercise of the power conferred by section 3-A
of the U. P. Sales Tax Act, 1948, as amended from
time to time, antl in supersession of all previous
notifications on the subject, the Governor of Uttar
Pradesh is hereby pleased to declare that the turnover in respect of the goods specified in the List
below shall not with effect from April 1, 1956, be
liable to tax except-
(a) in the case of goods imported from outside
Uttar Pradesh at the point o1 sale by importer; and
(b) in the case of goods manufactured in Uttar
Pradesh, at the point of sale by the manufacturer;
and the Governor is further pleased to declare
that such turnover shall with effect from the said
date be taxed at the rate of one anna per rupee.
List
18. Jute goods"
]. K. Jute
Mills Co Ltd.
v.
Slate of
Uttar Pradesh
Venkatarama
Aiyar ].
]. K. jute
Mills Co. Ltd.
v.
State of
U ttar Pradesh
Venkatarania
Aiyar ].
6
SUPREME COURT REPORTS
[1962]
In due course, the U. P. Sales Tax Ordinance No. IX
of 1956 was replaced by the U. P. Sales Tax (Amendment) Act XIX of 1956, and that eame into force on
May 28, 1956. It merely reproduces the terms of the
Ordinance No. IX of 1956 with this modification
which is consequential, that the amended section
including s. 3-A shall "be deemed to have effect on
and from the first day of April, 1956". If notification
No. ST. 905/X dated l\farch 31, 1956, is valid there is
no question that the petitioner would be liable to pay
sales tax for the period in question at the rate of
one anna per rupee on the sale proceeds.
One of the dealers who had been aRsessed to sales
tax in accordance with this notification filed an application under Art. 226 in the High Court of Allahabad
calling in question its validity and
this proved
successful, the court holding that there was no power
in the State to issue the impugned notification under
s. 3-A on March 31, 1956, as that section was itself to
come into force only on April 1, 1956, vide Adarsh
Bhandar v. Sales Tax Officer (1). The correctness of
this decision is not under challenge in these proceedings. We do not therefore desire to express any
opinion on it.
vVith a view to remove the defect pointed out in
Adarsh Bhandar v. Sales
Ta.1· Officer('), the State
legislature passed the U. P. Sales Tax (Amendment)
Act XXIV of 1957. That Act received the assent of
the President on August 31, 1957, and was published
on September 3, 1957. It runs, so far as is material,
as follows:-
"For sub-section (2) of Section l of the U. P.
Sales Tax (Amendment) Act,, 1956, tho following
shall be and be deemed to havP always been substituted:-
'This Section, so much of Section 3, as relates to
the substitution of the second proviso to sub-section
(l) of Section 3 of the U. P. Sales Tax Act, 1948
(hereinafter called the principal Act) and section 4
shall have effect on and from the 31st day of
March, 1956'."
(I) A.!.R. I957 AJI. 475·
, '
> 2 S.C.R. SUPREME COURT REPORTS
7
•
\
The result of this amendment was that s. 3-A was
given retrospectively operation from March 31, 1956,
instead of April 1, 1956, as originally enacted. The
intention behind the legislation is obvious. If the
impugned notification was, as held in Adarsh Bhandar
v. Sales Tax OjJicer (1), invalid, because it was issued
before s. 3-A was in operation, that objection could no
longer hold good as th11t section would now operate
from 11 point of time anterior to the issue of the notification. If the State thought that this legislation
would give a quietus to the controversy, they were
sadly mistaken.
After the Amendment Act of 1957
came into force, another dealer who was sought to be
assessed pursuant to the notification dated March 31,
1956, filed a petition under Art. 226 before the Allahabad High Court and raised the contention that as the
Amendment Act merely amended s. 3-A and did not
in terms validate the impugned notification, no proceedings could validly be taken under t.hat notification
and that therefore the proposed levy was illegal. This
contention was again upheld by a Full Bench in Firm
Bangali Mal v. Sales Tax Officer('), which held that
there was a difference between the existence of a
power and its actual exercisP, that while by reason of
Act XXIV of 1957, a power had been conferred on
Government to issue a notification on March 31, 1956,
the notification actually issued on that date could not
be referred to that power, that it was in exercise of
the power supposed to have been conferred bys. 3-A
as it stood on March 31, 1956, and that in consequence
the impugned notification was not saved by the new
Act.
This decision set the legislature again on the move
and that brings us to what may be said to be the final
round in the game. The State legislature enacted a
fresh legislation for the purpose of effectuating the
impugned notification. That was U. P. Sales Tax
Validation Act XV of 1958. It received the assent of
the President on May 3, 1958, and was published in
the Official Gazette on May 6, 1958.
The preamble
to the Act states that "it is expedient to provide for
(1) A.LR. 1957 All. 475·
(2) A.LR. 1958 All, 478.
). K. Jute
}rfills Co, Ltd.
v.
'State of
U ttar Pradesh
Venkataranza
Aiyar ].
/. T\. jute
Mills Co. Ltd.
v.
State of
Uttar Pradesh
Venkatara1na
Aiya1 J.
8
SUPREME COURT REPORTS
[1962] •
tho validation of certain notifications issued under the
U. P. Sales Ta.x Act, 1948, (U. P. Act XV of 1948) and
any action taken in pursuance thereof". Section 3 of
the Act which deals with the present matter runs
as follows:-
" 3.
Validation of certain notifications and action
taken in pursuance thereof.-
( l) Notwithstanding any judgment, decree or
order of any court, the notifications specified in Part
A, Part B and Part C of the Schedule shall be
deemed to have been issued in exercise of the
powers conferred respectively by section 3, .section
3.A and section 4 of the U. P. Sales Tax Act, 1948,
as if the said sections were in force on the date on
which the notifications were issued in the form in
which they were in force immediately before the
commencement of this Act and all the said notifications shall be valid and shall be deemed always to
have been valid and shall continue in force until
amended, varied or rescinded by any notification
issued under any of the said section.
(2) Anything done or any action taken (including
any order made, proceeding taken, direction issued,
jurisdiction exercised, assessment made or tax
levied or collected) purporting to have been done
or taken in pursuance of any of the notifications
specified in the Schedule shall be deemed to be and
to have been validly and lawfully done or taken."
In Part B are set out the notifications issued in exercise
of the powers conferred bys. 3A of the U.P. Sales Tax
Act, 1948, and one of them is the impugned notification No. ST. 905/X. If this legislation is valid, the
impugned notification stands validated and the petitioner would be liable to pay tax in accordance there·
with.
But the petitioner contends that the Validation Act
has not brought about any change in the situation
and that the notification dated March 31, 1956, continues lo be null and void now as before the Act. Two
grounds have beeu urged in support of this contention
-that on its true construction the Act does not in fact 1
validate the impugned not.ification and that it is not a
•
•
\
2 S.C.R. SUPREME COURT REPORTS
9
law which the State legislature was competent to
enact and it is therefore a nullity. We must now examine these contentions. As regard8 the first contention, the argument in support of it is that the words,
"in the form in which they were in force immediately
before the commencement of this Act" in s. 3 must, in
their setting, be read as qualifying the word, "notifications" and not the word "sections", and in that view
the notification in question is subject to the same
infirmity which attached to it when it was published
on March 31, 1956.
We are wholly unable to appreciate this contention. The object of the legislation as
stated in the long title and in the preamble to the Act
was to validate the impugned notification in relation
to the amended section. Schedule B to the Act
expressly mentions that notification. And if we are
now to accede to the contention of the petitioner, we
must hold that though the legislature set about
avowedly to validate the notification dated March 31,
1956, it failed to achieve that object. A construction
which will lead to such a result must, if that is possible, be avoided. The words, "in the form in which
they were in force immediately before the commencement of this Act", no doubt occur after the word,
"notifications". But then the words, "in the form"
can have no reference to the impugned notification,
because it had never changed form, whereas they were
quite appropriate to s. 3A, because it had been
amended. It should further be noted that the Validation Act was published both in Hindi and in English,
and both of them were authorised versions. The
words in the Hindi version make it clear beyond all
doubt that the words, "in the form in which they
were in force immediately before the commencement
of this Act" qualify the word "sections" and not the
word "notifications". That is the view expressed by a
Bench of the Allahabad High Court in H. L. M. Biri
Works v. Sales Tax Officer (1), on a comparison of the
two versions, and we are in agreement with it. There
woulq have been no scope for this argument if transposing the words, the section read, "as if the said
(1) A.I.R. 1959 All. 208.
a
]. K. jute
Mills Co. Ltd.
v.
State of
Uttar Pradesh
Venkafarrima
Aiyar ].
]. K. jute
Mills Co. Ltd.
v.
State of
Uttar Pradesh
Venkatarama
Aiyar ].
10
SUPREME COURT Rl!:POR'l'S
(1962)
•
sections were, in the form in which they were in force
immediately before the commencement of this Act, in
force on the date on which the notifications were
issued." But even in its present setting that is the
meaning of the section, and the impugned notification
must be held to be within the saving of the Validation
Act.
We now proceed to examine the second contention
of the petitioner that the Validation Act is itself invalid
as being ultra vires the powe•s of the State legislature
under the Censtitution. The argument of the learned
Attorney-General in support of this contention ma.y
thus be stated.
The State legislature derives its
authority to enact a law with respect to tax on the
sale of goods under entry 54 in List II of the Seventh
Schedule to the Constitution. It has been held that a
sale for the purpose of the entry must be what in law
is recognised as sale. Likewise, a law imposing tax on
sales of goods must, to be intra vires, possess certain
well-defined characteristics associated with such laws.
In The Province of Madras v. Boddu Paida.nna and
Sons (1) it has been held that sales tax is a tax on the
occasion of sale. In the present case, the sales sought
to be taxed took place between April 1, 1956 and July
31, 1956, whereas the Validation Act, by force of
which the tax becomes payable, came into force in
195S. It is therefore not a tax on the occasion of sale.
Moreover a sales tax is an indirect tax which can be
passed on by the seller to the purchaser. The Sales
Tax Acts passed by the legislatures of several States
provide for the seller collecting the tax from the
purchaser as does the U. P. Sales Tax Act XV of 194S,
vide s. SA. That could be done only if the tax was
levied before the sale took place. Therefore by the
very nature of it there could be no retrospective legislation in respect of sales tax. And finally it is argued
that the imposition of a tax retrospectively would be
inconsistent with the provisions of the U.P. Sales Tax
Act, 194S, and could not have been contemplated by
that Act.
Such for example are the provisions of
s. SA which provide for the registration of dealers for
(I) [1942] F.C.R. 90.
•
'
•
••
"'
2 S.C.R. SUPREME COURT REPORTS
11
tho assessment years, the deposit into Treasury of
sales tax collected from the purchasers in certain
contingencies, s. 14 of the Act which imposes penalty
for non-registration under s. SA, and rule 63 which
provides for the deposit of the sales tax collected under
s. 8A(4) within thirty days of the expiry of the month
in which the amount is charged.
It is accordingly
contended that whether we have regard to the true
features of the sales tax legislation or the provisions of
the U.P. Sales Tax Act, the Validation Act could not
be held to be one with respect to sales tax, that it is
therefore not within entry 54, and as there is no other
entry in List II or List III of the Seventh Schedule to
the Constitution, under which the legislation could be
justified, it must be held to be ultra vires. So ran the
argument.
The point for decision, stating it succinctly, is whether the Validation Act is within the ambit of entry
54 in List II of the Seventh Schedule to the Constitution. That entry confers on the States authority to
enact a law with respect to tax on ·sales of goods.
Now what is the extent of that authority? There must
be in fact a sale as recognised by law. It is only then
that a tax could be imposed.
But if the transaction
sought to be taxed is not a sale, a law which seeks to
tax it, treating it as a sale, would be ultra vires. Thus
in The Sales Tax Officer v. Messrs. Budh Prakash Jai
Prakash(') a tax on agreement to sell was held to be
not authorised by the entry, and in The State of
Madras v. Gannon Dunkerley & Co., (Madras) Ltd. (2),
a tax on the supply of materials in a contract for the
construction of works simpliciter, on the footing of a
sale was held to be outside the entry, and the legislation which imposed such a tax was struck down as
ultra vires. But where the trans:wtion is one of sale of
goods as known to law, the power of the State to
impose a tax thereon is plenary and unrestricted
subject only to any limitation which the Constitution
might impose, and in the exercise of that power, it
will be competent to the legislature to impose a tax
(1) [1955] I S.C.R. 243.
(2) [1959J s.c.R. 379.
], K. Jule
J11ills Co. Ltd.
v.
State of
Uttar Pradesh
Venkatarama
Aiyar, ].
j. J(. jute
Mills Co. Ltd.
v.
State of
Vilar Pradesh
Ven/.latarama
Aiyar ].
12
SUPREME COURT REPOR.TS
[1962]
on sales which had taken place prior to the enactment
of the legislation.
But it is urged on the strength of certa.in observations in The Province of Madras v. Boddu Paidanna and
Sons(') that a sales tax is a tax on the occasion of sale,
and that therefore it could not be imposed with retrospective operation. This contention is, in our judgment,
wholly without substance. Kaw, the point for decision
in that case was whether a tax imposed by a Provincial
legislature on the sale of oil by a person who manufactured it was bad on the ground that it was in
essence an excise duty. While a sales tax could be
imposed by a Provincial legislature, an excise duty
could be imposed only by the Federal legislature. In
holding that the tax in question was a sales tax and
not an excise duty, the court observed as followR:-
"The duties of excise which the Coustitution Act
assigns exclusively to the Central Legislature are,
according to the Central Provinces Case, duties levied
upon the manufacturer or producer in respect of the
manufacture or production of the commodity taxed.
The tax on the sale of goods, which the Act assigns
excluslvely to the Provincial Legislatures, is a tax
levied on the occasion of the sale of the goods.
Plainly a tax levied on the first sale must in the
nature of things be a tax on the sale by the manufacturer or producer; but it is levied upon him qua
seller and not qua manufacturer or producer."
(p. 101).
In the context, the words, "on the occasion of the
sale" have reference to the character of the transaction
and not to the point of time at which the duty
becomes leviable, and they ha·rn no bearing on the
question as to when such a tax could be imposed.
And then it is argued that a sales tax being an
indirect tax, the seller who pays that tax has the right
to pass it on to the consumer, that a law which imposes a sales tax long after the sales had taken place
deprives him of that right, that retrospective operation
is, in consequence, an incident inconsistent with the
.J
true character of a sales tax law, and that the Valida-
•
tion Act is therefore not a law in respect of tax on the
(1) [1942J F.C.R. go·,
I
2 S.C.R. SUPREME COURT REPORTS
13
sale of goods, as recognised, and it is ultra vfres entry
54. \Ve see no force in this contention. It is no doubt
trne that a sales tax is, according to accepted notions,
intended to be passed on to the buyer, and provisions
authorising and regulating the collection of sales tax
by the seller from the purchaser are a usual feature of
sales tax legislation. But it is not an essential chamcteristic of a sales tax that the seller must have tho
right to pass it on to the consumer, nor is the power
of the legislature to impose a tax on sales conditional
on its making a provision for sellers to collect the tax
from the purchasers. Whether a law should be enacted, imposing a sales tax, or validating the imposition
of sales tax, when the seller is not in a position to
pass it on to the consumer, is a matter of policy and
does not affect the competence of the legislature.
This question is concluded by the decision of this
Court in The Tata Iron & Steel Co., Ltd. v. The State
of Biliar (1 ). The following observations of Das, C. J.,
bearing on this question might be quoted:-
" Under the 1947 Act the primary liability to pay
the sales tax, so far as the State is concerned, is on
the seller.
Indeed before the amendment of the
194 7 Act by the. amending Act the sellers had no
authority to collect the sales tax as such from the
purchaser. The seller could undoubtedly have put
up the price so as to include the sales tax, which he
would have to pay but he could not realise any
sales tax as such from the purchaser. That circumstance could not prevent the sales tax imposed on
the seller to be any the less sales tax on the sale of
, goods.
The circumstance that the 1947 Act, after
the amendment, permitted the seller who was a
registered dealer to collect the sales tax as a tax
from the purchaser does not do away with the
primary liability of the seller to pay the sales tax.
This is further made clear by the fact thrit the
registered dealer need not, if he so pleases or choo.
ses, collect the tax from the purchaser and sometimes by reason of competition with other registered
dealers he may find it profitable to sell his goods
(1) [1958} S.C.R. 1355.
./. K. Jute
fl-1 ii ls Co. Ltd.
v.
State of
Uttar Pradesh
Venkata1ama
.Aiyar ].
I96I
]. K. Jute
l\fills Co. Ltd
v.
State of
[Jttar Pradesh
Venkatarama
Aiyar ].
14
SUPREME COURT REPORTS
[1962]
and to retain his old customers even at the sacrifice
of the sales tax. This also makes it clear that the
sales tax need not be passed on to the purchasers
and this fact does not alter the real nature of the
tax which, by the express provisions of the law, is
cast upon the seller. The buyer is under no liability
to pay sales tax in addition to the agreed sale price
unless the contract specifically provides otherwise.
Sec Love v. Norman Wright (Builders) Ltd. If that
be the true view of sales tax then the Bihar Legislature acting within its own legislative field had the
powers of a sovereign legislature and could make
its law prospectively as well as retrospectively."
(pp. 1378-1379).
The decision of this Court in Buchirajalingam v.·
State of Hyderabad(') is also to the same effect.
The power of a legislature to enact a law with reference to a topic entrusted to it, is, as already stated,
unqualified subject only to any limitation imposed by
the Constitution. In the exercise of such a power,
it will be competent for the legislature to enact
a law, which is either prospective or retrospective. In The Union of India v. Madan Gopal (') it
was held by this Court that the power to impose tax
on income under entry 82 of List I in Schedule VII to
the Constitution, comprehended the power to impose
income-tax with retrospective operation even for a
period prior to the Constitution. The position will be
the same as regards laws imposing tax on sale of goods.
In M. P. V. Sundararamier & Co. v. The State of
Andhra Pradesh (3), this Court had occasion to consider
the validity of a law enacted by Parliament giving retrospective operation to laws passed by the State legislatures imposing a tax on certain sales in the course of
inter-State trade.
One of the contentions raised
against the validity of this legislation was that, having
regard to the terms of Art. 286(2), the retrospective
legislation was not within the competence of Parliament. In rejecting this contention, the Court observed:
(1) A.LR. 1958 s.c. 756, 759-60,
(2) [1954] s,c.R. 541.
(3) [1958) S.C.R. 1422,
'
..
.)
I
,
,.
2 S.C.R. SUPREME COUR'l' REPORTS
15
I.
..
I.
"Article 286(2) merely provides that no law of a
State shall impose tax on inter-State sales 'except
in so far as Parliament may by law otherwise provide'. It places no restrictions on the nature of
the law to be passed by Parliament. On the other
hand, the words 'in so far as' clearly leave it to
Parliament to decide on the form and nature of
the law to be enacted by it. What is material
to observe is that the power conferred on Parliament under Art. 286(2) is a legislative power, and
such a power conferred on a Sovereign Legislature carries with it authority to enact a law either
prospectively or retrospectively, unless there can be
found in the Constitution itself a limitation on that
power." (p. 1460).
And it was held that the law was within the competence of the legislature. We must therefore hold that
the Validation Act is not ultra vires the powers of the
legislature under entry 54, for the reason that it operates retrospectively.
It was finally urged on the basis of ss. 8-A, 14 and
rule 23 of the U. P. Sales Tax Act that they contemplated only a prospective legislation and that those
sections would be impossible of compliance under the
present legislation. This is a consideration which is
wholly foreign to the present question. The point
which we have got to decide is whether the Validation
Act is ultra vires. That has to be determined solely
on the construction of entry 54 in List II in the
Seventh Schedule, and any other provisions of the
Constitution bearing on the question. Even assuming
that the provisions of the U. P. Sales Tax Act XV of
1948 contemplate a levy of tax in futuro, that does
not affect the power of the legislature under entry 54
to enact a law with retrospective operation. It can
only result in those provisions being unenforceable as
regards the levy under the impugned notification.
Dealing with a similar contention in M. P. V.
Sundararamier & Co. v. The State of Andhra Pradesh (1), this Court observed:
"It is also contended that under the Sales Tax
(1) [1958] S.C.R. 1422,
1961
]. I<. jute
.i11ills Co. Ltd.
v.
State of
Uilar Pradesh
Venkataraina
Aiyar ].
]. J(. ] ule
ft.lilts Co. Ltd.
v.
State of
Uttar Pradesh
Venk11tara1na
Aiyar ].
16
SUPREME COURT REPORTS
[1962]
Acts, the levy of tax is annm1l and the rules contemplate submission of quarterly returns and payment of taxes every quarter on the admitted turnover, and that a conditional legislation under which
p<>yment of tax will becomo enforceable in futuro
would be inconsistent with the scheme of the Act
and the rules. But this argument., when examined,
comes to no more than this that the existing rules
do not provide a machinery for the levy and the
collection of taxes which might become payable in
future, when Parliament lifts the ban. Assuming
that that is the true position, that does not affect
the fact.um of the imposition, which is the only
point with which we are now concerned. That the
States will have to frame rules for realising the tax
which becomes now payable is not a ground for
holding that there is, in fact, no imposition of tax."
(p. 1454).
None of the grounds urged by the petitioner in support of the contention that the Validation Act is
ultra vires can be sustained. In the result we must
hold that the Validation Act is intra vires, and the
impugned notification dated .March 31, 1956, stands
validated by it.
This petition must therefore be dismissed with costs.
Pet it ion dismissed.
~I