T.S. Krishnamoorthy Iyer, J. -
(1.) (On behalf of himself & Balakrishna Eradi, J.) This Original Petition filed under Art.226 of the Constitution is to declare that the provisions of the General Sales Tax Act, 1125 (Act XI of 1125) imposing tax on 'works contracts' are not enforceable in any part of the Kerala State subsequent to 26-1-1960 and to issue a writ of certiorari or other appropriate writ and quash the orders Exx. P-l to P-5 assessing the petitioner to sales tax on 'works contracts' for the assessment years 1960-61 and 1961-62.
(2.) THE petitioner is a private limited company incorporated under the Indian Companies Act and having its principal office at Mattancherry originally in the Cochin State, then in the State of Travancore-Cochin and now in the State of Kerala. THE Sales Tax Officer, Special Circle, Mattancherry, assessed the petitioner to sales tax for the years 1960-61 and 1961-62 evidenced by the assessment orders Exx. P-l and P-3. THEse orders include assessments on the turnover on 'works contracts' undertaken by the petitioner. THE contention raised by him that the turnover with respect to 'works contracts' could not be subject to sales tax was over- ruled by the Sales Tax Officer and by the Appellate Assistant Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam, in appeals filed against the orders Exx. P-l and P-3. THE orders of the appellate authority are Exx. P-2 and P-4. In appeals filed against Exx. P-2 and P-4. the Sales Tax Appellate Tribunal agreed with the view taken by the Sales Tax Authorities. THE order of the Sales Tax Appellate Tribunal is Ex. P-5. Tax Revision Cases 22 of 1966 and 23 of 1966 filed under S.41 of the Kerala General Sales Tax Act, 1963 to revise the decision of the Appellate Tribunal were also heard along with the original petition.
It is necessary to state at this stage the exact factual position relating to the levy of the impugned tax. The State of Travancore and the State of Cochin were two separate sovereign States having plenary powers of taxation. The Travancore General Sales Tax Act XVIII of 1124 and the Cochin General Sales Tax Act XV of 1121 as amended by Act V of 1124 imposed tax on 'works contracts' also. As a result of the merger of the two States the State of Travancore-Cochin' was formed with a common legislature The said legislature enacted the Travancore-Cochin General Sales Tax Act (XI of 1125) imposing sales tax on 'works contracts'. The Act was published in the Travancore-Cochin Gazette, dated 17th January 1950 and S.1 (3) thereof provided that the Act would come into force on such date as the Government might by notification in the Gazette appoint. The requisite notification was issued by the Government on May 29, 1950, bringing the Act into force from May 30,1950, after the Constitution. The Travancore-Cochin General Sales Tax Act (XI of 1125) repealed the Acts of the Travancore and Cochin States from May 30,1950. On 1st of November 1956, the States Reorganisation Act of 1956 came into force and the State of Kerala was formed comprising the area covered by the Travancore-Cochin State excepting a small part thereof, and the District of Malabar in the Madras State. Thereafter the Kerala Legislature passed the Travancore-Cochin General Sales Tax (Amendment) Act, 1957 Act XII of 1957 amending the name of the Act T-C-Act XI of 1125 into General Sales Tax Act (XI of 1125) and extending its operation to the whole of the State of Kerala. The said Act came into force on 1st October 1957. The Kerala Legislature also passed the Kerala Surcharge on Taxes Act, 1957 (Act XI of 1957) for levy of surcharges on taxes on agricultural income, on the sale or purchase of goods and on profession. This came into force on 1st September 1957. The General Sales Tax Act (XI of 1125) has been repealed by the Kerala General Sales Tax Act (Act XV of 1963) which came into force on 1 4 1963. This Act does not authorise the imposition of tax on 'works contracts'.
The petitioner unsuccessfully challenged the imposition of Sales Tax on 'works contracts' for the assessment years 1952-53 under the TC. General Sales Tax Act (Act XI of 1125) and for the assessment years 1956-57 and 1957-58 under the General Sales Tax Act (XI of 1125) in proceedings under Art.226 and 227 of the Constitution in this Court. The decision of this Court reported in South India Corporation (Pte) Ltd., v. Secretary, Board of Revenue, Trivandrum 1960 KLJ. 255 was reversed in appeal by their Lordships of the Supreme Court in South India Corporation (P) Ltd. v. Secretary, Board of Revenue, Trivandrum AIR. 1964 SC. 207 on the ground that in view of the agreement, dated 25 2 1950 entered into between the President of India and the Rajapramukh of the State of Travancore-Cochin incorporating the recommendations made by the Indian States Finances Enquiry Committee with some modification, the State ceased to have any power, to impose tax in respect of 'works contracts' during the period of ten years covered by the agreement. The term of the agreement expired on 26 1 1960 The assessment of the petitioner to tax on 'works contracts' for the assessment years 1960-61 and 1961-62 has been made on the ground that the right to levy sales tax on 'works contracts' will revive after 26 1 1960.
(3.) THE points raised by the learned counsel for the petitioner can be stated broadly under two heads: (1) that the levy of tax on 'works contracts' under the provisions of the General Sales Tax Act (Act XI of 1125) for the period from 26-1-1960 to 30-3-1963 is not saved by Art.277 of the Constitution and (2) that the levy is violative of Art.14 of the Constitution. Point (1). THE submission of the learned counsel for the petitioner on this point centred round Art.277, 278 and 372 of the Constitution. THE scope and the combined effect of these Articles have been discussed by their Lordships of the Supreme Court in more than one decision. Subba Rao, J. considered the question whether Art.372 is subject to Art.277 and 278 of the Constitution in South India Corporation (P) Ltd, v. Secretary, Board of Revenue, Trivandrum AlR. 1964 SC. 207 and observed thus at page 215-:
"Article 372 is a general provision; and Art.277 is a special provision. It is settled law that a special provision should be given effect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply. THE earlier discussion makes it abundantly clear that the Constitution gives a separate treatment to the subject of finance, and Art.277 saves the existing taxes, etc. levied by States, if the conditions mentioned therein are complied with. While Art.372 saves all pre-constitution valid laws, Art.277 is confined only to taxes, duties, cesses or fees lawfully levied immediately before the Constitution. THErefore Art.372 cannot be construed in such a way as to enlarge the scope of the saving of taxes, duties, cesses or fees. To state it differently, Art.372 must be read subject to Art.277. While Art.372 is subject to Art.278, Art.278 operates in its own sphere in spite of Art.372. THE result is that Art.278 overrides Art.372; that is to say, notwithstanding the fact that a pre- Constitution taxation law continues in force under Art.372, the Union and the State Governments can enter into an agreement in terms of Art.278 in respect of Part B States depriving the State law of its efficacy. In one view Art.277 excludes the operation of Art.372, and in the other view, an agreement in terms of Art.278 over-rides Art.372 "
To the same effect are the observations of Rajagopala Ayyangar, J. in the decision of the Supreme Court in C. Rajagopalachari v. The Corporation of Madras AIR. 1964 SC. 1172. It was contended by the learned counsel for the petitioner that even though the Travancore- Cochin General Sales Tax Act (XI of 1125) is a preconstitution law for the purpose of Art.372, since there was no levy on the basis of the said enactment prior to the date of the Constitution and till 30 5 1950 even for some time after the Constitution, the levy of sales tax on 'works contracts' under the said enactment is not saved by Art.277 of the Constitution. We have no hesitation to over-rule this contention as devoid of any merit. The formation of the State of Travancore-Cochin was from July 1-7-1949. After the formation of the State of Travancore- Cochin, the existing laws of Travancore and the existing laws of Cochin were continued and were in force in the respective territories. On 26 1 1950 the date of the Constitution, sales tax was being levied on 'works contracts' in the territory of Travancore and in the territory of Cochin under the Travancore Sales Tax Act and the Cochin Sales Tax Act, the validity of which is beyond dispute. Though the Travancore-Cochin General Sales Tax Act (XI of 1125) which repealed the Travancore Act and Cochin Act, was published in the Gazette dated 17th January 1950, it was brought into force only on 30 5 1950. Until the said date the Travancore and Cochin Acts were in force. There was therefore a valid levy of tax on 'works contracts' by the Government of Travancore-Cochin State before the commencement of the Constitution. In the absence of an intention to discontinue the levy the effect of Art.277 of the Constitution would be to vest the Government of Travancore Cochin with the power to continue the levy on the basis of the legislative sanction in force on the date of the Constitution, until provision to the contrary is made by Parliament bylaw. The enactment's in force in the territories of Travancore and Cochin were repealed only on 30 5 1950. On 29-5-1950 by a notification issued by the Government under S.1 (3) of the Travancore-Cochin General Sales Tax Act (XI of 1125) the said enactment which among other things imposed sales tax on 'works contracts' was brought into force from 30 5 1950. The legislative competence regarding the Travancore- Cochin General Sales Tax Act (XI of 1125) in so far as it expressed the desire to continue the levy of sales tax on 'works contracts' in continuation of the law that was in force till then cannot be disputed. At this stage it is advantageous to reproduce Art.277 of the Constitution which reads thus:-
"277. Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district or otter local area may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law."