MADON - (1.) THE First Appellant is a partnership firm registered under the Indian Partner-ship Act, 1932 (Act No. IX of 1932). THE Second Appellant is one of the partners of the First Appellant Firm. THE First Appellant Firm carried on at all relevant times business as manufacturers of bidis and dealers in tendu 'leaves. THE Appellants filed a writ petition under Articles 226 and 227 of the Constitution of India, being Miscellaneous Petition No. 317 of 1971, against the State of Madhya Pradesh and the Divisional Forest Officer, Ralsen Division, challenging the validity of the amendment made in sub-section (1) of section, 8 of the Madhya Pradesh General Sales Tax Act, 1958 (M.P. Act No. 2 of 1959), by the Madhya Pradesh General Sales Tax (Amendment) Act, 1968 (M.P. Act No. 9 of 1968) to the extent that the said amendment treated tendu leaves differently from other raw materials and for an appropriate writ, order or direction quashing the levy of sales tax on tendu leaves disposed of (imposed?) by the State Government and for restraining the State Government and its officers from enforcing or giving effect to the Madhya Pradesh General Sales Tax (Amendment) Act, 1968, to the extent that it amended section 8(1) of the Madhya Pradesh General Sales Tax Act. 1958. In view of the reliefs claimed in the said writ petition, it is difficult to understand how Article 227 of the Constitution could at all come into the picture. This obviously was the result of the general laxity in drafting pleadings which is unfortunately becoming more prevalent as each year passes. THE said writ petition was in reality a petition filed under Article 226 of the Constitution. After the enactment of the Madhya Pradesh General Sales Tax (Amendment and Validation) Act 1971 (M.P. Act No. 13 of 1971), which inter alia amended the definition of 'dealer' in clause (d) of section 2 with retrospective effect and further amended section 8, the Appellants amended their writ petition to challenge also the validity of the said amendments. THE said writ petition was heard along with sixty-four similar writ petitions filed by other bidi manufacturers and dealers in tendu leaves and by a common judgment delivered on 14/10/1971, all these writ petitions were dismissed with costs. THE Appellants thereafter obtained from the High Court under sub-clause (a) of clause (1) of Article 133 of the Constitution, as it stood prior to the amendment of clause (1) by the Constitution (Thirtieth Amendment) Act, 1972, a certificate of fitness to appeal to this Court on the ground that the amount or value of the subject-matter of the dispute in the High Court, namely, the liability to pay tax, as also of the dispute on appeal was more than Rs. 20,000 and the Appellants have accordingly filed the present Appeal.
(2.) PRIOR to 1/04/1959, there were different laws in force in the State of Madhya Pradesh relating to the levy of tax on the sales and purchases of goods, each of them applying to different regions of the State. These laws were the Central Provinces and Berar Sales Tax Act, 1947, the Madhya Bharat Sales Tax Act, Samvat 2007, the Central Provinces and Berar Sales Tax Act, 1947, as extended to and in force in the Vindhya Pradesh and Bhopal regions, the Rajasthan Sales Tax Act, 1954, as in force in the Sironj region, and the Vindhya Pradesh Sales Tax on Coal Ordinance, 1948. With a view to consolidate and amend all these laws and to replace them by a uniform law for the levy of tax on the sales and purchases of goods in the entire State of Madhya Pradesh, the Madhya Pradesh Legislature enacted the Madhya Pradesh General Sales Tax Act, 1958 (M.P. Act No. 2 of 1959). This Act will hereinafter be referred to in short as "the M.P. Sales Tax Act". Under sub-section (2) of section 1, the M.P. Sales Tax Act extended to the whole of Madhya Pradesh and under sub-section (3) of section 1 it was to come into force on such date as the State Government may, by notification, appoint in that behalf. The M.P. Sales Tax Act was brought into force on 1/04/1959, by the Madhya Pradesh separate Revenue Department Notification No. 622-1586-V-SR dated 21/03/1959, published in the Madhya Pradesh Gazette dated 27/03/1959, Part 3, Section I. By the M.P. Sales Tax Act all the earlier sales tax laws in force in the State of Madhya Pradesh were repealed. All fiscal enactments are fair game for the amending zeal of the Legislatures and the M.P. Sales Tax Act has not been an exception to this rule. We are, however, concerned in this appeal with only a few sections of the M.P. Sales Tax Act and with only certain amendments made therein and we will confine ourselves to referring to them only. Section 4 of the M.P. Sales Tax Act provides for the incidence of taxation. Under it every dealer whose turnover exceeds the limit specified in sub-section (5) of section 4 for a particular period is liable to pay tax on his taxable turnover in respect of his sales or supplies of goods effected in Madhya Pradesh, Clause (d) of section 2 defines the term "dealer". The relevant provisions of that definition as originally enacted were as follows : "(d) 'dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration and includes - (i) the Central or a State Government or any of their departments, a local authority, a company, an undivided Hindu family or any society (including a co-operative society), club, firm or association which carries on such business; xxxxxxx." By clause (i) of section 2 of the Madhya Pradesh General Sales Tax (Amendment and. Validation) Act, 1971 (M.P. Act No. 13 of 1971) (hereinafter referred to as "the 1971 Act"), clause (d) of section 2 was amended. By this amendment, a new sub-clause (i) was substituted for the original sub-clause (i) and a further Explanation to the said clause (d) was inserted as Explanation II. This- substituted sub-clause (i) is as follows : "(i) a local authority, a company, undivided Hindu family or any society (including a cooperative society), club, firm or association which carries on such business". The new Explanation II is as follows : "Explanation II.- The Central or a State Government or any of their departments or offices which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash or for deferred payment, or for commission, remuneration or for other valuable consideration, shall be deemed to be a dealer for the purposes of this Act". By section 10 of the 1971 Act certain amendments, including the amendments made by clause (i) of section 2, were deemed to have formed part of the M.P. Sales Tax Act from the date of its commencement. The new sub-clause (i) was the substituted and the new Explanation II was thus inserted in clause (d) of section 2 with retrospective effect from 1/04/1959. By section 11 of the 1971 Act, all assessments, re-assessments, levy or collection of any tax or imposition of any penalty made or purported to be made and any action or thing taken or done or purported to have been taken or done in relation to such assessment, re-assessment, levy, collection or imposition under the M.P. Sales Tax Act before the commencement of the 1971 Act were validated as if they had been made, taken or done under the M.P. Sales Tax Act as amended inter alia by section 2 of the 1971 Act. The 1971 Act came into force on 6/05/1971.
(3.) SECTION 6 of the M.P. Sales Tax Act provides for the levy of tax. As originally enacted section 6 read as follows : "6. Levy of tax. - The tax payable by a dealer under this Act shall be levied on his taxable turnover relating to goods specified in Schedule II, at the rate and at the point mentioned in the corresponding entry in columns 3 and 4 respectively, of the said Schedule." Schedule II to the M.P. Sales Tax Act is divided into several parts. Part VI is the residuary part and contains only one entry which is as follows : JUDGEMENT_201_SUPP1_1986Html1.htm SECTION 11 of the M.P. Sales Tax Act confers upon the State Government the power to amend, by notification, any entry in Schedule II. By Notification No. 2741-1789-V-ST dated 29/08/1967, the rate of tax mentioned in the said residuary entry was increased from four per cent to seven per cent with effect from 1/09/1967. Schedule I mentioned in the said residuary entry contains the list of goods which are exempted from tax by section 10 of the M.P. Sales Tax Act. Under Entry 42 of Schedule I to the M.P. Sales Tax AM tobacco, manufactured or unmanufactured, cured or uncured, and tobacco products including cigarettes, cigars, cheroots and bidis are exempt from tax. SECTION 7 provides for the levy of purchase tax. As originally enacted (omitting the proviso thereto which is not material for our purpose) SECTION 7 was as follows : "7. Levy of purchase tax.- Every dealer who in the course of his business purchases any taxable goods, in circumstances in which no tax under section 6 is payable on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 6 : xxxxxxx" Clause (1) of section 2 of the M.P. Sales Tax Act, as originally enacted and as it stood at all relevant times, defined the expression "raw -material". This definition was as follows : "(1) 'raw material' means an article used as an ingredient in any manufactured goods or an article consumed in the process of manufacture and includes fuel and lubricants required for the process of manufacture, but does not include bullion and specie". Section 8 provides for the rate of tax in the case of raw materials. As originally enacted, section 8 provided as follows : "8. Rate of tax for raw material. - (1) Notwithstanding anything contained in this Act, but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce shall be one per cent of the sale or purchase price of such raw material. (2) Where any raw material purchased by a registered dealer under sub-section (1) is utilised by him for any purpose other than a purpose specified in the said sub-section, such dealer shall be liable to pay tax at the full rate mentioned in column 3 of Schedule II on the purchase of such raw material, together with .such penalty not exceeding twenty-five per cent of the amount of the sales-tax payable by such dealer as the Commissioner may determine having regard to the circumstances in which such use was made." Section 8 was amended several times. It is unnecessary to refer to those amendments except to mention that by the substitution of section 8(1) made by the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1967 (M.P. Act No. 23 of 1967) the rate of tax on the sale or purchase of raw material was increased to two per cent. This amendment came into force on 21/12/1967. We are concerned in this appeal only with the amendments made by the Madhya Pradesh General Sales Tax (Amendment) Act. 1968 (M.P. Act No. 9 of 1968) (hereinafter referred to as "the 1968 Act"), which was brought into force from 15/04/1968 and the 1971 Act. By the 1968 Act sub-section (1) of section 8 was substituted as follows: "(1) Notwithstanding anything contained in section 6 or section 7 but Subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of any raw material other than tendu leaves for the manufacture of other goods for sale in the State of Madhya Pradesh or in course of inter-State trade or commerce shall be two per cent of the sale or purchase price of such raw material : Provided that when the tax payable on the sale or purchase of such raw material under section 6 or 7 is payable at a rate lower than two per cent, the tax payable under this subsection shall be calculated at such lower rate." ;