- (1.) THESE nine petitions (Civil Writs Nos. 1741, 1761, 1762, 206, 608, 1576, 1527, 1481 of 1962 and No. 17 of 1963) were heard together and may be disposed of by one judgment. Main arguments were addressed in Civil Writ No. 1741 of 1962. The only question which calls for determination by us relates to the vires of Section 5 of the Punjab General Sales Tax Act (Punjab Act No. XLVI of 1948 ).
(2.) HERE, I may briefly state the facts on which Civil Writ petition No. 1741 of 1962 is based. The petitioner-firm Messrs. Nabha Rice and Oil Mills. Nabha, a registered dealer under the E. P. General Sales Tax Act, claims to be a partnership firm carrying on the business of extracting oil from sarson and other oil seeds, for which purpose they have installed an oil mill. It sells sarson oil and other oils thus extracted from sarson and other oil seeds, acquired by them from third parties and is liable to pay sales tax on sales of oil. The oil seeds are also purchased through its commission, agents, though the transaction between the dealers of oil seeds and the petitioner's commission agents has been stated to be independent sales and the supply by the commission agents to the petitioner in pursuance of the commission agency agreement has also been described not to amount to sale. The petition then proceeds to trace the history of the sales tax legislation and recites that the Punjab Legislature in exercise of its legislative power under entry No. 48, list II of Schedule VII read with Section. 100, Government of India Act, 1935, enacted the E. P. General Sales Tax Act in 1948 for the purpose of imposing sales tax on sales as defined by the said Act. In 1958, the State Legislature purported to impose a tax described as purchase tax on certain manufacturers alone by enacting the E. P. General Sales Tax (Amendment) Act 1958 : Act No. VII of 1958. This amending Act amended Section 4 of the principal Act and also, introduced definition of "purchase" by inserting Section 2 (ff ). The definitions of the term "turnover" in Section 2 (i) and "dealer" in Section 2 (d) of the Principal Act were also suitably amended. In 1959, certain other amendments made by the Punjab legislature in the definition of "purchase" by Punjab Act No. 13 of 1959 and punjab Act No. 24 of 1959 are then noticed in the petition. Section 4, it is worth noting here, has been described by the petitioner to be the charging section and is reproduced, so far, as relevant, followed by the reproduction of the definition of the word "purchase" as amended; it is then pointed out that oil seeds or oil and rasin are the only two items which have been listed in Schedule 'c' to the Act which according to the petitioner firm, would show that out of all the raw materials required for use in the manufacture of goods for sale, the Legislature arbitrarily singled out oil seeds for the imposition of purchase-tax Stress is then laid on the plea that purchase tax; imposed only on those persons who acquire specified goods for use in the manufacture of goods for sale is in substance imposition of excise duty on manufacture and, therefore, beyond the legislative competence of the State Legislature. This is one attack on the purchase tax contained in the petition. The petition further proceeds to state that extraction of oil from oil seeds by crushing the seeds by mechanical process does not amount to manufacture of oil though it may amount to production of oil because oil already exists in oil seeds and the process of extraction merely separates oil from the seeds and does not bring it into existence for the first time. It is by this process of reasoning that extraction of oil from oil seeds, according to the petitioner's plea is stated not to amount to manufacture of oil.
(3.) THE petition then notices Section 14 of the Central Sales Tax Act, 1956, (hereinafter called the Central Act), according to which certain goods have been declared to be of special importance to inter-State trade and commerce and oil seeds and volatile oils have been specified as belonging to that category. Under the E. P. General Sales Tax Act, (hereinafter called the Punjab Act), as amended by Act No. VII of 1958, producers of oil, according to the petition, are required to pay tax at two stages; first they are asked to pay purchase tax of 2 per cent. on the purchase of oil seeds and next they are asked to pay sales tax at 4 per cent. on the sale of oil produced. The petition next seeks to elucidate the point by the plea that similarly the manufacturers of soap or other goods by using oil for the said manufacture are liable to pay purchase tax at 2 per cent. on the oil purchased and also sales tax at 4 per cent. on the soap or other goods sold by them. Both these categories of taxation, according to the petition, are beyond the legislative competence of the State Legislature because entry No. 54 of List II of Schedule vii of the Constitution empowers the State Legislature only to impose a tax either oil sale or on purchase and not on both. The Punjab Act as amended in 1958 is stated also to violate Section 15 of the Central Act because it imposes on oil seeds and oils declared to be of special importance to inter-State trade and commerce a tax in excess of 2 per cent. leviable at more than one stage. The definition of the word "purchase" also, according to the petitioner, creates arbitrary discrimination between manufacturers using oil seeds as a raw material and manufacturers so using other raw material, there being no rational basis for this distinction. The petitioner claims to have been submitting returns to the Assessing Authority regularly and paying the tax assessed. The petitioner paid the sales tax on its taxable turnover but did not deposit any amount in respect of purchase tax on oil seeds acquired for the purpose of its business because the petitioner had been advised that this provision was ultra vires the State Legislature. The Assessing authority ignoring the representation made by the petitioner-firm issued a notice in form S. T. XIV requiring the petitioner to appear before him on 24-10-1962 for the assessment year 1961-62. Reference is then made to a petition filed by messrs. Guru Nanak Oil Mills, Khanna in the Supreme Court under Article 32 of the constitution of India and admitted by the said Court. The Supreme Court, according to the averments in the petition, stayed the passing of the final assessment order pending the disposal of the writ petition in that case. Apprehending that the Assessing Authority might proceed with the petitioner's assessment, the petitioner-firm approached this Court in November, 1962 by the present writ petition on the allegations just enumerated.;