Shri Kakar and Mukerji, J. -
(1.) THE reference was made to the larger Bench of the Board by a member sitting singly while deciding seven revisions under sec. 14 the Sales Tax Act. THE facts leading to the reference, are that the applicant firms sold goods during assessment period between 9-3-61 and 2-3-63. Some of these goods fell in the general category taxable under sec. 5 of the Rajasthan Sales Tax Act. , as it then stood. THE relevant portion of this section reads as under - "the tax payable by a dealer under this Act shall be at such single point in the series of sale by successive dealers as may be prescribed and shall be levied at the rate of 4 per cent on the taxable turnover. " Provided also that where the State Government is of the opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the official gazette, provide that the rate at which the tax payable by a dealer in respect of any goods to be specified in the notification shall be such not exceeding 10%* on the taxable turnover as may be specified in the said notification. " (*the figure 10 was substituted for the figure 7 by Rajasthan Act 14 of 1961 published on 4-5-61 but it became effective from 9-3-61, vide sec. 3 of Rajasthan Act 23 of 1958.) Notification No. F. 5 (23) E & T/61-I, dated 9-3-61 was issued by the State Government which reads as below - Jaipur March 9, 1961. No. 5 (23) E & T/61-I - In exercise of the powers conferred by proviso second to sec. 5 of the Rajasthan Sales Tax Act, 1954 (Rajasthan Act No. 29/1954) the Government of Rajasthan being of the opinion that it is expedient in the public interest to do so, hereby provides that with immediate effect the rate of sales tax payable by a dealer in respect of the goods specified in column 2 of the list annexed hereto shall be as shown against them in column 3 of the said list. LIST S. No. Description of goods Rate of Tax 48. Goods other than the following - 5% (i) Goods specified in Sr. No. 1 to 47, above, (ii) Stationery including paper and newsprint, (iii) Readymade clothes, (iv) Footwear (v) Spectacles, spectacle frames and lenses, (vi) Gur, (vii) Kerosene Oil. This notification came for consideration before the Board of Revenue in the case of State of Rajasthan vs. Man Mohan Soda Water Factory (1964 RRD 297) and it was observed as under - "a plain reading of the above provision shows that the intention of the Legislature was that sales tax shall be levied at the general rate of 4 per cent on the taxable turn over at a single point in the series of sales, the point of levy being prescribed separately. This is subject to the qualification that the State Government may by a notification in the official gazette prescribe rates other than the general rate of 4 per cent which may not exceed 7 per cent in respect of any goods or class of goods to be specified in the notification. THE above said notification which purports to have been issued under sec. 5 of the Act first lists 47 items on which rates different from the general rate of 4 per cent have been specified. THE last and 48th item says that tax will be charged at 5 per cent on goods other than those listed as item 1 to 47 as well as six other items mentioned under item 48. THE effect is that the general rate of 4 per cent envisaged in sec. 5 will be chargeable on six items only viz. stationery including paper and newsprint, readymade clothes, footwear, spectacles, spectacle frames and lenses, gur and kerosene oil. As a result of this notification the general rate of sales tax has been restricted to six items, which is manifestly contrary to the intention of the Legislature as embodied in sec. 5 of the Act. Such a defective notification cannot serve as a legal sanction for levying tax on the opposite party for the sale of aerated water at the rate of 5 per cent which is higher than the general rate of 4 per cent. It is settled law that any rule or notification which is inconsistent with the provision of the statute under which it is issued is void and without effect. This Board has had occasion to strike down defective notifications under various Acts, and the notification referred to above deserves the same fate in so far as it seeks to impose tax at the omnibus rate of 5 % on all items other than those enumerated in item 48 of the notification. " (Our note - *it should have been 10 per cent.)
(2.) THEREUPON Act No. 11 of 1966 was promulgated on 5-5-66 (The date 5-9 66 given in the reference is incorrect ). Sec. 3 of this Act reads as below - (a) in sub clause (a) of clause (ii) of the first proviso for the expression 'two per cent of the sale price thereof the expression 'the limits laid down in cl. (a) of sec. 15 of the Central Sales Act, 1956 (Central Act 74 of 1956)' shall be substituted. (b) after the second proviso the following new proviso shall as from the 9th day of March, 1961 be deemed to have been added namely - "provided also that the rate at which the tax is payable by a dealer in respect of sale of any goods specified in a general way as "goods other than the following "or" all goods except only the goods specified in particular serial numbers etc. " in notifications issued from time to time fixing the rate of tax under the Act during the period commencing on the 9th day of March 1961, and ending on the 1st day of March 1963, for which five per cent rate of tax was fixed therein shall during the period of operation of those notifications, be five per cent on the taxable turnover. "
A number of revisions were filed on behalf of the Assessing Authorities challenging orders of the Deputy Commissioner (Appeals) reducing the rate from 5 to 4 per cent on items covered in clause 48 of the notification of March 9, 1961 ; by virtue of the third proviso to sec. 5, added by Rajasthan Act 11 of 1966. In a few of the cases such as State vs. M/s, Shriram Laduram (1966 RRD 382) and Sales Tax Revisions No. 46/1956 State vs. M/s. Phoolchand Hari Krishan decided on 19-6-66 and State vs. Nathuram (Revision Petition No. 327/1965) etc. the view taken was that the concerned Deputy Commissioner (Appeals) has committed an error in reducing the rate of tax from 5 to 4 per cent after passage of the Act No. 11 of 1966. In the seven cases out of which this reference has arisen, one of us thought that as the third proviso to sec. 5 of the Sales Tax Act was inconsistent with the main section, it would-be invalid and it cannot enhance the rate of tax given in the main section. As in a number of cases decided previously a different view had been taken he thought it proper to make the following reference to the larger Bench for an authoritative opinion "whether in the circumstances of the cases and in accordance with the provisions of law as it stands, the proviso to sec. 5 of the Sales Tax Act have (sic.) been inconsistent with the main section of the Act, such rate of tax should prevail. " Though the reference as framed poses only one question viz. , whether the proviso to sec. 5 of the Sales Tax Act is inconsistent with the main section yet we feel that a complete answer to the reference would also involve the consideration of following necessary corrollaries : (ii) If the proviso is inconsistent whether it will over ride the provisions of the main section or would be invalid to the extent of this inconsistency ? (iii) Whether this Court would be competent to strike down this part of Act 11 of 1966. We will also have to consider in the process how far the case of State versus Man Mohan Soda Water Factory had laid down correct law. The counsel for the assessee applicants based their case, more or less, on the argument which has been raised in the reference note. Their main contention was that since main sec. 5 of the Rajasthan Sales Tax Act provided for levy of a sales tax of 4 percent, any proviso which raised this tax on unspecified items to more than 4 percent would be inconsistent with the main section. As observed in Interpretation of Statutes by Caries at page 217 and in Interpretation of Statutes by Bindra at page 560" a proviso cannot be construed as enlarging the scope of an enactment when it can be fairly and properly construed, without attributing to it that effect. " It was, therefore, contended that any proviso which enlarges the scope of an enactment should be deemed to be invalid. The Advocate General contended that the Notification No. F. 5 (23)E&t/6l-I, dated 9-3-61 was valid in toto, and the view taken in Manmohan Soda Water Factory's case by the Board of Revenue that the Notification was manifestly contrary to the intention of the Legislature as embodied in sec. 5 of the Sales Tax Act, was not tenable. He based his reply on two arguments; in the first place, item 48 of the Notification which has been held in State versus Manmohan Soda Water Factory's case as general and unspecified was, as a matter of fact, a specified item. In support of this argument he cited 1960 STC 698 : secondly he argued that the intention of the legislature at the relevant time was that the main Section authorised the levy of Sales Tax at the rate of 4 percent on the taxable turnover without any condition. The second proviso to sec. 5 envisaged three further conditions i. e. (l) opinion of the State Government that it was necessary or expedient in the public interest to issue a notification in the official gazette; and (2) specification of goods in the notification; and (3) levy of such rate of tax not exceeding 10 percent. The main section and the proviso in the opinion of the learned Advocate General were not inconsistent, as the scope of the two was different. If the Government could not form an opinion that it was not in the public interest to issue the notification under the proviso, it was not authorised to charge more than 4% of tax on the taxable turn over,: but if the Government could form the opinion that it was necessary in the public interest to do so, it could levy a tax on a specified item upto 10 percent. As item No. 48 as stated above, is a specified item the Government was competent to issue the notification imposing a rate of tax higher than that provided in the main section. We may pause to consider this argument. It appears to us that the ruling of the Supreme Court was not brought to the notice of the Hon'ble Member of the Board who decided the case of State versus Manmohan Soda Water Factory. In 1960 STC their Lordships of the Supreme Court were pleased to observe as under: - "the question is whether these words 'all goods other than those specified from time to time in Schedule 'a' and in the preceding entries' amount to a specification of goods for the purpose of Sec. 10. On behalf of the petitioner, Mr. Pathak contends that only the mention of specific goods can amount to specification and mention of goods in such general language as 'all goods other than those specified from time to time in Schedule 'a' and in the preceding entries' cannot be said to be a specification of goods. We are unable to accept this argument. " Further their Lordships held that entry 80 in Schedule (B) is a specification of goods within the meaning of Sec. 10. This is the entry referred to in the question. There is, thus no other possible method, to specify thousands of items which cannot be categorised under specific heads except in the way it was done in item 48. Item 48 of the notification therefore, was a specified item and in our opinion there was no inconsistency between the main Sec. 5 and the proviso. Under the proviso, the rate of tax was increased, as stated above, after fulfilling further conditions and those conditions were formation of opinion by the Government that it was necessary and in public interest to do so, specification of the items and levy of tax not exceeding 10 percent.
The Advocate General further pointed out that it was as a matter of abundant caution that Act No. 11 of 1966 was promulgated of which Sec. 3 (b) deals with the point at issue. The Advocate General stated that this settled the matter finally.
Regarding the argument that a proviso which is inconsistent with the main section is bad in law, the Advocate General stated that this view was not tenable. He cited 'craies on Statute law', 1963 sixth Edition page 219 saying 'it sometimes happens that there is a repugnancy between the enacting clauses and the provisos and saving clauses. The question then arises, how is the Act taken as a whole to be construed. The generally accepted rule with regard to the construction of a proviso in an Act which is repugnant to the purview of the Act is that laid down in Att Gen. vs. Chelse Water Works, as namely "that where the proviso of an Act of Parliament is directly repugnant to the purview, the proviso shall stand and be a repeal of the purview, as it speaks the last intention of the makers. " Bindra's Interpretation of Statutes, 1965 fourth Edition, page 52 was also cited saying "the proper function of a proviso is that it qualifies the generality of that main enactment by providing an exception and taking out as it were from the main enactment, a portion which but for the proviso would fall within the main enactment and at page 53 is given "when the proviso appended to the enacting part is repugnant to it, it unquestionably repeals the enacting part. " He further cited AIR 1949 Nagpur 149 Burmah Shell vs. Municipal Committee, Jabbalpore. 'para 5 of it reads as below : "the rule enacts that commodities included in certain classes and specified in the schedule shall be taxable subject to the proviso that rock oil including petroleum and kerosene shall not be taxed. There is a clear contradiction between item 31 and the proviso and I think as there is doubt the proviso must prevail. When the proviso appended to the enacting part is repugnant to it, it unquestionably repeals the enacting part: see Maxwells Interpretation of Statues, P. 136 of Edition 7. "
Air 1957 Bombay 20 (Keshawalal Premchand vs. Commissioner of Income Tax, Bombay) was cited to the effect that a legislature may enact a substantive provision in the garb or guise of a proviso and if the Court is satisfied that the language used in the so called proviso is incapable of making it applicable to the section, then the Court, if the proviso has a clear meaning must look upon it as a substantive provision enacted by Legislature and give effect to it as such. Air 1965 Punjab 5 Crown Flour Mills) holds that if after a careful examination of the proviso the Court comes to the conclusion that the legislature intended to create a liability, it is a duty of the Court to give effect to it even though it is embodied in a proviso. The substance and not the form must be looked at. The Advocate General further argued that the effect of sec. 3 (b) of Act No. 11 of 1966 was that the operation of the Notification of 9-3-61 had been fortified by an Act of the legislature, though the Notification itself was valid. This was well within the power of the legislature and there was no conflict in saying that goods generally will be taxed at 4 percent but other goods be taxed at 5 percent or any other percentage which the Legislature has chosen to provide. The Advocate General argued that there was no repugnancy between the main section and the proviso.
The Advocate General also argued that taxation with retrospective effect is not unconstitutional or invalid and cited AIR 1966 Supreme Court 764 (Jawahar-mal vs. State of Rajasthan ). This clearly lays down that the power to Legislate includes the power to legislate prospectively as well as retrospectively, and in this respect, tax legislation is not different from any other legislation. AIR 1963 Supreme Court 1967 (Rai Ram Krishna vs. State of Bihar) is also to the same effect. finally, the Advocate General argued that the proviso in question was embodied in an Act of the Legislature and as the Board of Revenue is a creation of the Rajasthan Legislature, it cannot question the validity of any of its Acts. He cited 1967 STC (XIX) 66 (Sicros Coffee Company vs. The State of Mysore) in which it has been held that a question as to the vires of a statute which a taxing officer has to administer cannot be raised before him.
We have given careful consideration to these arguments. Reverting to the main question posed in the reference before us i. e. whether the proviso of the Sec. 5 of the Sales Tax Act is inconsistent with the main Section of the Act, we have first to consider the scope and function of a proviso in a statute. As remarked at page 217 of Caries on Statute Law 'the effect of an excepting or qualifying proviso, according to the ordinary rules of construction, is to except out the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it, and such a proviso cannot be construed as enlarging the scope of an enactment when it can be fairly and properly construed without attributing to it that effect," He, however, further observed on the authority of a number of cases that sections, though framed as provisos upon preceding sections may exceptionally contain matter which is in substance a fresh enactment, adding to and not merely qualifying what goes before. In Keshavlal Premchand vs. the Commissioner of Income Tax, Bombay, their Lordships of the Bombay High Court had observed on the interpretation of proviso in statutes as under : - - "a proviso, which is in fact and in substance a proviso, can only operate to deal with a case which but for it would have fallen within the ambit of the section to which the proviso is a proviso. The section deals with a particular field and the proviso excepts or takes out or carves out from the field a particular portion, and therefore it is perfectly true that before a proviso can have any application the section itself must apply. It is equally true that the proviso cannot deal with any other field than the field which the section itself deals with. The duty of the Court also must be to give the proviso as far as possible a meaning so restriated as to bring it within the ambit and purview of the section itself. If a proviso is capable of a wider connotation and is also capable of a narrower connotation, if the narrower connotation brings it within the purview of the section then the Court must prefer the narrower connotation rather than the wider connotation. But a Legislature may enact a substantive provision in the garb or guise of a proviso and if the Court is satisfied that the language used in the so called proviso is incapable of making it applicable to the section then the court, if the proviso has a clear meaning, must look upon the provisio as a substantive provision enacted by the Legislature and give effect to it as such. "
Thus we see that a proviso has ordinarily three functions (1) it excepts or takes out or carves out from the field a particular portion, (2) it qualifies the matter already given in the main section and (3) but sometimes a Legislature may enact a substantive provision in the garb or guise of a proviso and in such a case, it must be looked upon as substantive provision enacted by a legislature and given effect to. It will be obvious that the nature of the proviso and its functions will depend upon the language used by the Legislature while enacting the same. We may now proceed to analyse Sec. 5 with its proviso as it stands today after promulgation of the Act No. 11 of 1966. The main sec. 5 when Act 11/1966 came into force reads as follows : "the tax payable by a dealer under this Act shall be at such single point in the series of sale by successive dealers as may be prescribed and shall be levi-ed at the rate not exceeding 10 percent on the taxable turnover, as may be noti-fied by the State Government in the official gazette. "
The proviso which was added by Act 11 lays down that the rate at which the tax is payable by a dealer in respect of sale of any goods specified in a general way "as goods other than following" or "all goods except only the goods specified" in particular serial numbers etc. , in notifications issued from time to time fixing the rate of tax under the Act during the period commencing on the 9th day of March 1961 and ending on the 1st day of March 1963, for which 5% rate of tax was fixed therein shall during the period of operation of these notifications, be 5% on the taxable turnover. " The amended main Section obviously is operative from the date of its enactment i. e. 4th day of May, 1964. The proviso which deals with the rate of tax on certain category of goods mentioned therein relates to a period from 9-3 61 to 1-3 63 it can not in any way be said to be excepting or qualifying the main Section. Even though it is given in the form of a proviso, to our mind, it is a substantive enactment which the Legislature intended to be as such since it is a substantive enactment, there is no question of its being inconsistent with the main sec. 5 of Rajasthan Sales Tax Act. As a matter of fact, we fail to see any inconsistency, as the main sec. 5 as it exists after 4-5 64, and the proviso relate to two different periods. The validity of the proviso on the ground that it gave a retrospective effect to a taxation measure, was not challanged before us. The validity of the Act has to be judged in the light of the legislative competence of the legislature which passes the Act. As has been held in AIR 1963 S. C. at p, 1667 "the legislative power conferred on the appropriate Legislatures to enact law in respect of topics covered by the several entries in three lists can be exercised both prospectively and retrospectively. Where the Legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law, but it can also provide for the retrospective operation of the said provisions. It was further observed that "the legislative power conferred on the legislature includes the subsidiary or the auxiliary power to validate laws which have been found to be invalid. If a law passed by a legislature is struck down by the Courts as being invalid, it is competent to the appropriate legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed.
In view of the fact that there does not appear to us to be any inconsistency between the proviso and the main section, we may not deal with any details on the other related questions. We have already referred to a number of authorities which have categorically laid down that where the proviso is directly repugnant to the purview the proviso shall stand and be deemed to be a repeal of the purview.
We would, therefore, give our reply to the reference by the Hon'ble Member of the Board of Revenue in the following terms: - The proviso in question of Section 5 of the Rajasthan Sales Tax Act is not inconsistent with the main section being a substantive provision itself and the rates given in the proviso in respect of the commodities during the period specified in the proviso shall prevail.
Per Shri Gajendra Singh - I had the benefit of going through the order of reference proposed to be passed by my two learned colleagues. In the reference that was made it was clearly mentioned that the rule laid down by the Board of Revenue in the case of State vs. Manmohan Soda Water Factory was a good law and struck down the Notification of the Government found inconsistent with the provisions contained in sec. 5 of the sales tax at a rate higher than that mentioned in sec. 5 itself. After that judgment of the Board of Revenue, the Government made an amendment in the Sales Tax Act by Act No. 11 or 1966 which added a new proviso after the second proviso in the following words: - Sec. 3 In section 5 of the principal Act - (a ). . . . . . . . . . . . . . . . . . . . . . . . . (b) After the second proviso the following new proviso shall as from the 9th day or March, 1961 be deemed to have been added namely: - "provided also that the rate at which the tax is payable by a dealer in respect of sale of any goods specified in a general way as "goods other than the following or all goods except only the goods specified" in particular serial numbers, Notifications issued from time to time, fixing the rate or tax under the Act, during the period commencing on the 9th day or March, 1961 and ending on the 1st day of March, 1963, for (which 5% rate of tax was fixed therein shall, during the period of operation of those Notifications, be 5% on the taxable turn over. "the result of this amendment of Sec. 5 of the Act was that by adding proviso to Sec. 5, it levied a tax of 5% on the genera! goods with retrospective effect. Ordinarily, the proviso is construed as provision of the enactment and not enhancing it. It was on this basis the interpretation was put forward that when the controlling section fixed the maximum tax to be levied by the Government, it was not open for the Government to levy a tax at an enhanced rate by a separate Notification. It was for this reason that the rule was laid down by this Board in the case of State vs. Manmohan Soda Water Factory. The Government, it seems in order to take away the effect of the judgment of the Board of Revenue passed a validating Act No. 11 of 1966 by the amendment of Sec. 5 by adding a third proviso to it as referred to above. I agree with my learned colleague and also with the arguments advanced by the Advocate General that the Government can in the guise of a proviso enact a substantive section which may run counter to the provisions or the main section and in that case the natural interpretation should be given to that proviso as if it was an independent section. In support of this contention, the Advocate General cited the case of Burma Shell Oil Storage and Distributing Go. of India vs. the Municipal Committee Jubbulpore reported in A. I. R. 1949 Nagpur page 148. This case has really no application here. In that case the Municipality levied octroi on articles used for lighting for fuel or for wood : but in the rules a proviso was added that rock oil including petroleum and kerosene was not to be subjected to octroi. It was held that crude oil and deisel oil was produced from petroleum and therefore it could not also be taxed. Thus the proviso to section only provided an exception and did not provide a substantive section. Similarly, in the case of Keshavlal Premchand vs. the Commissioner of Income Tax Bombay reported in A. I. R. 1957 Bombay page 20 Chhagla Chief Justice and Tandulkar J. dealt with the case under the Income Tax Act and observed the normal function of proviso in an enactment and administered caution in giving it a wider connotation rather than a narrower one and came to the conclusion that the first proviso did not entitle the assessee to deduct loss in speculative business from business profits. They held that it was a substantive provision made by the legislation in the garb of proviso and the language was clear enough. The Court must make this proviso applicable in its clear meaning. In the matter of M/s Crown Floor Mills Delhi, reported in A. I. R. 1956 Punjab page 7 dealing with again an income tax matter their Lordships came to the conclusion that the proviso was only a complimentary to the original enactment and thus there was no inconsistency. Thus Caries on Statute Law in Part I of his book dealt with the construction of statutes, in para 10 of Part I has dealt with the effect of one part of statute the construction of the other parts. The sub-para 9 of this para 10 at page 217 he has provided a useful guidance with reference to decided English cases, how a proviso should be constructed. He has clearly laid down that the effect of an accepting or qualifying proviso according to the ordinary rules of construction is to except out of the provision of an enactment or to qualify some thing enacted therein, but further stated that such a proviso cannot be construed as enlarging the scope of an enactment when it can be fairly and properly construed without attributing to it that effect.
(3.) IN dealing with the case of West Derby Union vs. Metropolitan Life Assurance Co. Lord Watson clearly observed that it would be adopting a very dangerous and certainly unusual course if one were to import legislation from a proviso wholesale into the body of the statute, although he perfectly admitted that there may be and are many cases in which the terms of an intelligible proviso may throw considerable light on the ambiguous import of the statutory words. Lord Herschall in the same case said 'i decline to read into any enactment words which are not to be found there and which would alter its operative effect because of provisions to be found in any Proviso". Similarly, Moulton L. J. in the case of R. V. Dibdin made similar observations. But Caries in dealing with different kinds of proviso stated that some section though framed as a proviso upon preceding section may exceptionally contain matter which is in the substance of a fresh enactment, adding to and not merely qualifying what goes before. IN this connection he cited in the foot note the case of Rhondda U. D. C. vs. Taff Valery and the case of Local Government Board vs. South Stonehum Union. This one authority cited by the Advocate General and the last observations of Craies on Statute Law I am of the opinion that the natural interpretation of a proviso is to carve out an exception or to qualify the provision of the main enactment; but where a specific enactment is made in the guise of a proviso, then that proviso has to be interpreted independently of this section. This rule can be safely applied to the interpretation of proviso to sec. 5 of the Sales Tax Act and the retrospective operation given to the third proviso by the amendment Act No. XI of 1966. IN sec 5 of the Act as it originally stood provided that a rate of tax payable by dealer shall not exceed a certain percentage on a taxable turn over. This percentage has been amended from time to time as the history of amendment would indicate The effect of the new proviso by the amending Act No. 11 of 1966 was that the legislature intended and in fact validated the levy of 5% rate of tax on all goods in general way with retrospective effect. Thus in doing so, the legislature clearly intended to go beyond the scope of sec. 5 of the Sales Tax Act which restricted the leavy of the rate of tax at a certain percentage.
I, therefore, agree with my learned colleagues that this proviso was in the guise of a substantive provision and its validity cannot be questioned by this court. The reference may be answered accordingly. .;