Shah, J. - (1.) Bijli Cotton Mills - respondent in this appeal - is a manufacturer of cotton yarn and is registered as a dealer under the U.P. Sales Tax Act (15 of 1948). Under the U.P. Sales Tax Act (15 of 1948) which came into force on April 1, 1948, sales-tax became payable on sales of a uniform rate of three pies in a rupee. By Act 25 of 1948 , S. 3-A was incorporated in Act 15 of 1948 conferring upon the Provincial Government power to declare by notification that the proceeds of sale of any goods or class of goods shall not be included in the turnover of any dealer except at such single point in the series of sales by successive dealers as the State Government may specify. By S.7 as amended by Act 25 of 1948, a dealer had the option to submit his return on the basis of the turnover of the sales in the previous year or on the basis of turnover of the sales in the current year. The respondent company opted to be assessed on the basis of the turnover of the previous year ending March 31, 1948.
(2.) In exercise of the power under S. 3-A of the Act the Government of U.P. issued a notification declaring that with effect from June 9, 1948, the proceeds of goods entered in column 2 of the schedule to the said notification (which included cotton yarn) shall not be included in the turnover of any dealer except at the point in the series of sales by successive dealers, and that with effect from June 9, 1949, the rate of tax in respect of the turnover of the aforesaid goods shall be as set out in the schedule. As a result of the notification the sale of cotton yarn became taxable at a single point i.e., at a point of sale by the importer if the goods were imported from outside Uttar Pradesh and at a point of sale by the manufacturer, if manufactured in Uttar Pradesh, and the rate of tax in respect of cotton yarn was fixed, since the date of the notification, at six pies per rupee.
(3.) The Sales -Tax Officer, Hathras in assessing the respondent company to sales-tax for the assessment year 1948-49 held that because of the notification issued by the Government, the rate of three pies per rupee in respect of sales of cotton yarn was to apply in the year of assessment for the first 69 days and for the remaining part of the year the rate of six pies per rupee was to apply, and on that account notwithstanding that the assessee had opted under S. 7 to be assessed on the basis of the turnover of the previous year, the rate of three pies was applicable to the assessable turnover for the first 69 days and for the rest of the year the rate applicable was six pies per rupee. This order was modified in appeal by the Judge (Appeals) Sales Tax, Meerut, who directed assessment of tax on the turnover at a uniform rate of three pies per rupee. But the order of the appellate court was reversed by the Judge (Revisions) Sales Tax, U.P. who restored the order of the Sales -tax Officer. The Judge (Revisions) Sales Tax at the instance of the respondent company then referred to the High Court of Judicature at Allahabad the following question: "Whether the assessees who had elected the previous year are liable to pay tax in the assessment year 1948-49 according to the rates prevailing during the year ", and the High Court following its Judgment in Modi Food Products Ltd. v. Commissioner of Sales Tax, U.P. , AIR 1956 All 35 answered the question as follows: "all sales of the assessee during the previous year which corresponded with the calendar year 1947 have to be taxed at the flat rate of 3 pies per rupee when making the assessment for the assessment year 1948-49". With special leave, the Commissioner of Sales Tax, U.P. has appealed to this Court against the order of the High Court.;