MarcA20

376 SUPii:EME COURT REPORTS [1964)

HYDERABAD CHEMICAL AND PHARMACEUTICAL

WORKS LTD. ETC.

STATE OF ANDHRA PRADESH AND ORS. [P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, J. c. SHAH,

N. RAJAGOPALA•AYYANGAR AND s. M. SIKRI, JJ.]

Medicinal and Toilet Preparation (Excise Duties) Act No. 16 of 1955, s. 21-Whether repeals rule 36 frcrmed-under Hyde'rabad

Abkari Act-If Act No. 16 is a law "otherwise made by Parliament' within the meaning of Art. 277- Hyderabad Act and Rul.1> 36 repealed-Constitution of India, Art. 277, Entry 84, List I of Vll Schedule-Hyderabad Medical Preparations and Spirituous Rules 1345 F, r. 36 ..

The appellants are manufacturers of medicine in which they have to use alcohol. According to r. 36 of the Medical Preparation and Spirituous Rules, 1345 F framed under the Hyderabad Abkari Act, 1316 F the appellant used to pay certain fees to the State Government for the supervision of the use of alcohol by the appellants. After the coming into force of the Medical and Toilet Preparations (Excise Duties) Act, 1955 and the Rules framed thereunder the appellants contended that since R. 36 was repealed by this Act they had not to pay that fee. On the refusal of the State Government to accept their contention the appellants filed writ petitions before the High Court challenging the power of the Government to levy the fee. But the High Court held that R. 36 was not repealed and dismissed the writ petitions.

Thereupon the appellant filed the present appeals on certificates granted by the High Cf>urt.

Before this Court it was contended on behalf of the appellant that s. 21 of the 1955 Act in terms repealed any corresponding State law and therefore R. 36 stood repealed. The respondent contended that the proviso to that section saved all previous rules which were not inconsistent with the Act and hence R. 36 should be deemed to be in force. It was further contended by the respondent-State that R. 36 remained in force because it was meant to carry out the general purpose of the Hyderabad Abkari Act which was a general Act relating to alcohol and intoxicating drugs.

Held: (i) By virtue of Entry 84 List I of the VII Schedule to the Constitution no charge could be levied on the manufacture of medicinal .preparations except by the Union of India and since the 1955 Act is a law made otherwise by Parliament within the meaning of Art. 277 the duties and other charges which used to be levied by the State in connection with medicinal preparations could no longer be levied by it. Further the effect of s. 21 of the Act is that so far as the Hyderabad Act applied to the use of alcohol in the manufacture of medicinal and toilet preparations, the Hyderabad Act must be deemed to have been repealed.

(ii) By reasons R. 143 of the 1956 Rules r. 36 must be held to have been repealed after the coming into force of the 1955 Act and the rules framed thereunder. The purpose of R. 36 is clearly

overed by the 1955 Ac.t and the rules framed thereunder and It cannot survive the said Act and Rules in view of s. 21 of the Act and r. 143 and the proviso to s. 21 cannot be availed of by the State.

(iii) The field covered by R. 36 is completely covered by the 1964 Rules framed under the Act and therefore R. 36 can no longer be Hyderabad Ohemiwl justified as good under the general law relating to alcohol and inand Pharmaceulical toxicating drugs as contended by the State.

Works Ltd. etc.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 399- 403 /1962. Appeal from the judgment and order dated February 17, 1961 of the Andhra Pradesh High Court in Writ Petitions Nos. 400, 431 to 433 and 495 of 1958.

K. Srinivasamurthy and Naunit Lal, for the appellants (in all the appeals).

K. R. Chaudhuri and B. R. G. K. Achar, for the respon- dents (in all the appeals).

March 20, 1964. The Judgment of the Court was delivered by

Stat< of Andhra Prod"h and Ors.

WANCHOO, J.-These are five connected appeals on certi- Wanchoo, J. ficates granted by the High Court of Andhra Pradesh. They involve a common question of law and will be dealt with together. The brief facts necessary to understand the question of Jaw raised in these appeals are these. The appellants manufacture medicines in which they have to use alcohol. Before Parliament passed the Medicinal and Toilet Preparations (Ex- cise Duties) Act. No. 16 of 1955, (hereinafter referred to as the Act), the appellants were working under licences granted under the Hyderabad Abkari Act, No. l of 1316-F. Under that Act certain rules called the Medical Preparations and Spirituous. Rules, 1345-F were framed and r .. 36 thereof provided that "the expenses of the establishment for the supervision of the work shall be borne by the pharmaceutical laboratory

(licensee) as per the decision of the Commissioner Excise". It appears that for the manufacture of medicines, the appellants used to be supplied with alcohol. Further the State qovemment posted on the bonded manufacturies of the appellants certain supervisory excise staff, and r. 36 was obviously framed to re-imburse the Government for expenses incurred in that behalf. After the Act came into force from April l, 1957, the appellants who were manufacturing medicinal preparations were governed by it and the Rules framed thereunder and took licences under the Act. The appellants then contended that as the Act had repealed all previous provisions with respect to medicinal preparations, they were no longer bound to pay the charges prescribed under r. 36 of 1345-F Rules. Their contention was that this rule along with such provisions of the Hyderabad Abkari Act, which concerned medicinal preparations were repealed by the Act and the Rules framed thereunder. The State Government could therefore no longer ask

hem to pay the costs of the establishment posted at their

1964 bonded manufacturies for supervision . The appellants there- Hyi, uabad cn.mical upon filed writ petitions in the High Court challenging the

and Pharma<eutical levy of these charges.

Work< Lid. do.

•· The petitions were opposed on behalf of the State and its j,":;;,:{ :::f'Or~. contention was that.even though the Act and the Rules framed thereunder had come into force from April I, 1957, r. 36 Wanchoo, J. of the 1345-F Rules continued and was not repealed by the Act and the Rules framed thereunder, and the State was entitled to the expenses of the supervisory staff and could realise it from the appellants.

The High Court held that r. 36 could not be said to have been repealed by the Act and the Rules framed thereunder and was still good law. In this connection the High Court pcinted out that the Hyderabad Abkari Act was not concerned only with medicinal preparations but was a general Act dealing with excise including alcohol, and that alcohol in the ultimate analysis was liquor; therefore the State Government which supplied alcohol to the appellants for the purpose of making medicinal and toilet preparations for which no duty was paid was entitled to see that the alcohol was not used for purposes other than that for which it was supplied to the appellants.

Accordingly the High Court held that r. 36 of the 1345-F Rules was designed to achieve this object, under the general law of excise contained in the Hyderabad Abkari Act, and was therefore good. In consequence, the writ petitions were dismissed.

The appellants then applied for certificates to appeal to this Court, which were granted; and that is how the matter has come up before us The only question that falls for consideration therefore is whether after the coming into force of the Act and the Rules, ' r. 36 of the 1345-F Rules can still be said to survive. There is no doubt that the Hyderabad Abkari Act was a general Act - and before the Constitution came into force, r. 36 of the 1345-F Rules would be good law. Under the Constitution, however, medicinal and toile't preparations came under entry 84, List I of the Seventh Schedule to the Constitution, which provides for duties of excise on tobacco and other goods manufactured or produced in India, except-

(a) alcohclic liquors for human consumption;

(b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing a.lcohol or any substance containing opium, Indian hemp and other narcotic drugs and narcotics. No charge could thereafter be levied 6n the manufacture of medicinal preparations except by the Union in the shape of duties under item 84 of List I.

• The State Government however insisted on the payment ol the charges.

But under Art. 277 of the Constitution "any taxes, duties, 1964

cesses or fees, which, immediately before the commencement Hyderabad Chem.ical of this Constitution were being lawfully levied by the Govern-•"tP~"" 1 ment of any State ...... may, notwithstanding .that hose taxes, or :_ 1

• e1c. duties cesses or fees are mentioned m the Umon List, contrnue State of Andhra to be ievied and to be applied to the same purposes until pl'Ovi- Prad"'h and°''

sion to the contrary is made by Parliament by law". In view Wanckoo, J. of this provision, all duties and charges levied by the State before the coming into force of the Constitution on the maufacture of. medicinal preparations could continue to be levied until law was made by Parliament otherwise. It is not in dispute that the Act came into force from April l, 1957 and is a law made otherwise by Parliament within the meaning of Art. 277, and therefore duties and other charges levied by the State

in connection with medicinal preparations could no longer be levied by it. Further the Act specifically provides in s. 21 that "if, immediately before the commencement of this Act, there is in force in any State any law corresponding to this Act, that law is hereby repealed". It is true that the Hyderabad Abkari Act was a general law which was concerned with liquor and intoxicating drugs generally; it thus applied to alcohol also (treating it as liquor) used for manufacturing medicinal preparations. The effect of s. 21 therefore is that so far as the Hyderabad Abkari Act applied to the use of alcohol, treating it to be liquor, in the manufacture of medicinal and toilet preparations, the Hyderabad Abkari Act must be deemed to have been repealed to that extent only by s. 21.

Reliance is placed on behalf of the State on the proviso to s. 21, which lays down that "all rules made, ...... under any law hereby repealed shall, so far as they are not inconsistent with this Act. have the same force and effect as if they had been respectively made ...... under tbis Act and by the authority empowered hereby is in that behalf." It is therefore contended that by virtue of the proviso to s. 21, r. 36 of the 1345-F Rules must be deemed to continue. We are of opinion that there is no force in this contention. Rules were framed under the Act in 1956 and came into force along with the Act. Rule 143 of these Rules provides that all rules made under any law •corresponding 'to the Act in force in any State are hereby repealed except as respects things done or omitted to be done before such repeal. Consequently all rules framed for the purpose of the manufa.cture of medicinal preparations came to an end in view of r. 143 of 1956 Rules. Therefore r. 36 of 1345-F Rules, which appears in the Medicinal Preparations and Spiritui?US ules mus~ e held to be no longer good law so far as it

apples to med1cmal preparations. That is one reason why we consider. tha.t r. 36 must be held to have been repealed after the com mg mto. force of the Act and the Rules framed thereunder. The proviso to s. 21 on which reliance has been placed

1964 cannot change the position in view of the new Rules framed Hyderabad Ohemka! in 1956 with respect to medicinal preparations. As soon as th.e aftll PhaN11aewtical new Rules came mto force the old rules must fall and there- 1s

Worka Ltd. etc. a specific provision in the new Rules (namely r. 143) which Stare 0jAndhra says that all rules made under any la.w corresponding to the Prnduh and Ors. Act are hereby repealed.

= ' J We may refer in this connection to the construction of ffa1&C"OO, • r. 36 of the Rules of 1345F. It provides that the expenses of the establishment for the supervision of the work shall be borne by the pharmaceutical laboratory. The establishment which has to be paid for under r. 36 therefore is for the supervision of the work done by the pharmaceutical laboratories.

Now the work done by a pharmaceutical laboratory is to manufacture medicinal preparations. Rule 36 therefore provides that expenses of the establishment for the supervision of the work of medicinal preparations manufactured by pharmaceutical laboratories have to be paid by the laboratory concerned. The supervisory staff which has to be paid for under r. 36 therefore is meant for the supervision of the manufacture of medicinal preparations and it is for that purpose only that expenses have to be borne by the laboratory concerned. The purpose of the rule therefore is clearly covered by the Act and the Rules framed thereunder and it cannot survive the Act and the Rules in view of s. 21 of the Act and r. 143 of the 1956-Rules, and the proviso to s. 21 cannot be availed of by the State.

This brings us to the alternative argument on behalf of the State, namely, that in any case the rule still remains good because it is meant to carry out the general purpose of the Hyderabad Abkari Act, namely to see that unauthorised sale of alcohol is not made for human consumption by the laboratory to which it is supplied for purposes of manufacture of medicinal preparations. Therefore it is said that'the rule is good inasmuch as it is concerned with the enforcement of the general law relating to alcohol and intoxicating drugs contained in the Hyderabad Abkari Act. We are of opinion that there is no force in this contention either. In the first place, as we have already indicated. the main object of the supervisory stall" mentioned in r. 36 is lo supervise the manufacture of medicinal preparations. In that connection the supervisoTy staff will certainly see that the alcohol supplied is used for the purpose for" which it is supplied and is not used in any other manner.

Rule 3(5 is only concerned with seeing that the manufacture of med icin:d preparations is made properly and is done under the supervision of the establishment attached to each laboratory; and it is only incidentally that in that connection the establishment is also to see that the alcohol supplied is not used other- , wise than for the purpose of manufacture. That however wilt

not make the rule good under the Hyderabad Abkari Act, which deals with alcohol and intoxicating drugs generally.

What we have said above is borne out if we look at the l'JG4 1956-Rulcs. Rule 20 provides that in case of manufacture in Ilydum,-;; d(,,,, ,,,;,.,. bond (and we are concerned in the present appeals with such and, Phmmacu,1;,-01 manufacture) alcohol on which duty has not been paid sh~.ll fl 0"h Ltd.'"· be used under excise supervision. Rule 42 provides that "it siat• 0{_:1,,, u, ia

shall be open to the Excise Commissicner to determine the size l'm-1<-.,7, """ o.·,. of the supervisory staff in consultation with the licencee." 1t is rraw!oo J. clear therefore that under the 1956 Rules s'Upervisory staff is ' attached to bonded manufacturies which manufacture medicinal preparations. This is al<o the purpose of r. 36. Further r. 141 provides that "the licencee of a bonded manufactory or warehouse shall, where so required by the Excise Commissioner, provide the officer and the staff posted to the mannfactory or bonded warehouse with suitable lodging conveniently situated to the factory or bonded warehouse premises at a rent not exceeding 10 per cent of the pay of each officer so accommodated. If for any reason the licencee is not able to provide such accommodation he shall provide suitable accommodation to the satisfaction of the Excise Commissioner near the manufactory or bonded warehouse recovering only 10 per cent of the pay of the occupant." Then r. 45 provides that "the officer-in-charge shall exercise such supervision as is required to ensure that alcohol issued fCJr a. certain preparation is added to the materials which go to make that preparation and that no portion of such alcohol is diverted to other purpose." It is clear therefore from these rules that the supervisory staff is attached to a bonded manufactory for the purpose of supervision to see that the manufacture is carried on properly and also to see that alcohol issued for the purpose of manufacture is not diverted to any other use. We cannot therefore accept the argument that simply because the supervisory staff has got to see that alcohol supplied, assumig it to be liquor. is not misused, r. 36 is still good law because, its purpose is to see that the general la.w relating to alcohol and intoxicating drug~ contained in the Hyderabad Abkari Act is carried out As the I 956-Rules show it is the duty of the supervisory staff attachd to a bonded manufactory to see that the manufacture is properly made and that alcohc!l supplied is not diverted to any use except tha.t of the manufacture of the preparation. This being the purpose of the 1956-Rules, the levy under r. 36 of 1345-F cannot be justified on the ground that under that rule che supervisory staff has to see that the general law relating to alcohol and intoxicating drugs is not violated. There is no doubt that the field covered by r. 36 of the 1345-F Rules is _.-- completely covered by the Rules framed under the Act and therefore r. 36 can no longer be justified as good under the general law rela.ting to alcohol and intoxicating drugs. We may add that the Act or the 1956 Rules make no provision for any such charge as is provided in r. 36 of 1345-F Rules, the intention being that the duty under the Act will cover all expenses

1964 for enforcing it. The fact that members of the supervisory stall ryd<ra;;;;; ichtmiool are the servants of the respondent makes no difference because 1n<i Pharduti<.al they function under the Act and the rules framed thereunder

Work~ Lt etc. and not under the Hydera.bad Act. We are therefore of opinion Swte oJAwlhra that reading s. 21 of the Act and r. 143 of the Rules framed Pradesh and Ora. thereunder, r. 36 of 1345-F Rules must be held to have been

W h J repealed and thaJ. it is not saved by the proviSo to s. 21. We anc oo, . therefore allow t e appeals, set aside the orders of the High Court, anc\ direct the issue of writs as prayed for. The appellants will get their costs from the respondenne set of hearing costs.

Appeals allowed.

STATE OF ANDHRA PRADESH AND ORS

P. B. GAJENDRAGADKAR, C.J.

K. N. WANCHOO, J.

c. SHAH

N. RAJAGOPALA•AYYANGAR

s. M. SIKRI, JJ.

s. 21

Abkari Act-If Act

Art. 277

Constitution of India

Art. 277

Hyderabad Abkari Act, 1316

s. 21

Union of India

Parliament

Art. 277

s. 21

s. 21

s. 21

Hyderabad

K. Srinivasamurthy

Naunit Lal

K. R. Chaudhuri

B. R. G. K. Achar

WANCHOO

Wanchoo

High Court of Andhra Pradesh

April l, 1957

Seventh Schedule

India

Art. 277

Andhra

Wanckoo

Art. 277

s. 21

s. 21

s. 21

s. 21

s. 21

s. 21

Worka Ltd.

s. 21

s. 21

s. 21

s. 21


78.C.R.

SUPRE:ME COURT REPORTS 383

COMMISSIONER OF SALES TAX, U.P.

BIJLI COTTON MILLS, HATHRAS

IP. B. GAJENDRAGADKAR, C.J., K. N. WAINCHOO, J. c. SHAH,

N. RAJAGOPALA AYYANGAR AND S. M. SIKRI, JJ.]

Sales Tax-Reference under Act pending before High Court -Impugned !egis!ation in relation to the matter in reference amended-High Court whether can take cognisance of am•nded legis!ation-U.P. Sa!es Tax Act, 1948 (U.P. Act 15 of 1948), ss. 3A, 31.

The respondent is a manufacturer of cotton yarn and is registered as a dealer under the U.P. Sales Tax Act, 1948. This act came into force on April 1, 1948. Under this Act, sales tax was payable on sales of cotton yarn at a uniform rate of 3 pies in a rupee. Under s. 3(A) of the Act the Government of U.P. issued a not'fication declaring that with effect from June 9, 1948, the Sales Tax would be charged at the rate of six pies per rupee in respect of sales of the cotton yarn. In the present case, the assessee had opted under s, 7 of the Act to be assessed on the turnover of previous year. The Sales Tax Officer held on the basis of the notification dated June 9, 1948, that the rate of three pies per rupee in rspect 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.

The decision of the Sales Tax Officer was affirmed by the Judge (Revisions) Sales Tax. The Judge referred the case to the High Court. On reference the High Court held on the basis of its judgment in Modi Food Products Ltd. that the rate of three pies per rupee would apply for the assessment of 1948-49 because the assessee had opted under s. 7 to be assessed on the basis of the turnover of the previous year. In the meantime the legislature of Uttar Prade5h by Act III of 1963 enacted s. 31 which makes Sales-tax exigible from an assessee who has opted to pay tax .on the turnover of the previous year, as if the altered rates were in force during the previous year. The amendment is given retroactive operation and applies to assessments oending or closed.

The question for consideration before this Court was whether this Amending Act would apply to the present assessment.

He!d: (i) 'l'he law found incorporated in s. 31 by Amending Act III of 1963 would apply to the present case. This Court in giving its opinion on the question in the light of the amending Act is seeking to apply a legislative provision which was, by express enactment, in force at the time when the liability arose, for s. 31 enacted by Act III of 1963 is to be deemed to have been in operation at all material times in supersession of the previous law declared by this Court in Modi Sugar Mills Ltd.'s case. This Court is, therefore, not seeking to apply any Jaw to the question posed before the High Court which was not in force on the date of the transaction which is the subject-matter of the reference

Modi Food Products Ltd. v. Commissioner of S_ales-tax, U.P.

A.I.R. 1956 All. 35 and Commissioner of Sales-tax, U.P. v. Modi

Sugar Mills Ltd., [1961) 2. S.C.R. 189 explained.

March 2()

(ii) When the question has been referred to the High Court -OvmmissWnrr of and in the meantime the law has been amended with retroactive

Sal•·• Tnx, U.P. operation, it would be the duty of the High Court to apply the ,.. law so amended as if it applies. By taking notice of the law llijli Collon ~N/,, which has been substituted for the original provision, the High

llriJhra.9 Court is giving effect to tr.e legislative intent and docs no more than what must be deemed to be necessarily implicit in the question referred by the Tribunal, provided the question is couched in terms of sufficient amplitude to cover an enquiry into the question in the light of the amended law, and the enquiry does not necessitate investigation of fresh facts.

MI s. Chatturam Horilram Ltd. v. Commissioner of Income tax, Bihar and Orissa, {1955] 2 S.C.R. 290 and M / s. Rampur

Distillery Chemical Works Ltd. v. Commissioner of Income-tax, U.P., I.T. Reference No. 362/58 dt. 17-1-64, distinguished.

CIVIL APPELLATE JURISPlCTION: Civil Appeal No. 546 nf

1962. Appeal by special leave from the judgment and decree dated December 17, 1958 of the Allahabad. High Court in Misc. Case No. 152 of 1952.

C. B. Agarwala and C. P. Lal, for the appellant

S. K. Kapur, S. K. Mehta and K. L. Mehta, for the respondent.

March 20, 1964. The Judgment of the Court was delivered by ·

SHAH, J -Bijli Cotton Mills-respondent in tbis appealis 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 05 of 1948) which came into force on April 1, 1948, sales-tax became payable on sales of diverse commodities including cotton yarn at a uniform rate of three pies in a rupee. By Act 25 of 1948, s: 3-A was incorporated in Act 15 of I 948 conferring upon the Provincial Goverhlnnt power to declare by notification that the proceeds of safe.. of any goods or class of goods shall not be included in the turnover of any dealer except at such single point in the serie's of sales by successive dealers as the State Government may specify. Bys. 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 mies 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.

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, I 948, 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 1964 in respect of the turnover of the aforesaid goods shall be as Oommi..W..r of set out in the schedule. As a result of the notification the sale saie. Tan:, U.P. of cotton yam became taxable at a single point i.e. at a point BT 0;;,, M"ll <Jf sale by the importer if the goods were imported from outside IJ ' Balhaa

'• 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 notification, at six pies per rupee.

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 thret' 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 Coutt of Judicature at Allahabad the following question:

"Wht'ther the assessees who had elected the previous year are liable to pay tax in the assessment year I 948-49 according to the rates prevailing during the year", and the High Court following its judgment in Modi Food Products Ltd. v. Com1"issioner of Sales Tax, U.P.(') 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 fla.t 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. . It may _be observed that the judgment of the Allahabad Htgh Court m Modi Food Products Ltd.'s case(') was confirmed by this Court: Commissioner of Sales Tax, U.P. v. The

(') AI.R. 1956 All. 35.

L, P(D)ISCI-13

SluJh, J.

1.9C4

Cor.; missioner of Bales 'l'nx. c:.P.

Bijli Cotton 11!ills,

Jlaflira..~

S!iah, J.

Modi Sugar Mills Ltd.(') But the Legislature of the State of Uttar Pradesh has. since that judgment was pronounced. enacted validating legislation by Act lII of 1963 which has provided by s. 7 of the Amending Act that:

"After section 30 of the Principal Act. the following shall be added and be deemed. to have been added with effect from the first day of April, 1948. as new section 31 : '31. (l) Where any dealer has. in accordance with the provisions of section 7, as it stood prier to its amendment by section 7 of U.P. Act XIX of 1956. opted to be assessed to tax on the basis of his turnover of the previous year, he shall be assessed to tax at such rates as arc prevalent during the year for which the assessment is being made, and if the rates of tax on any goods or class of goods are altered during such assessment year, the dealer, in respect of the turnover of such goods, shall be liable to pay tax at the altered rates, as if the altered rates were in force during the previous'year also proportionately for the same number of days as they are in force during the assessment year.

(2) Notwithstanding any judgment, decree or order of any court, all assessments or orders made. actions or prcceedings taken, directions issued. jurisdictions exercised or tax levied or collected by any officer or authority purporting to act under the provisions of sub-section (I) of section 7. as it stood prior to its amendment by section 7 of U .P. Act XIX of 1956, shall be deemed to be good and valid in law as if such assessments, orders, actions, proceedings, directions, jurisdictions and tax have

been duly made, taken, issued, exercised, levied or collected. as the case may be, under or in accordance with the said provisions of this Act as amended by the Uttar Pradesh Bikri Kar (Sanshodhan) Adhiniyam, 1962 and as if the amendment so made had been in force on all material dates.

Explanation-For the purpose of this section the expression "previous year" shall have the meaning assigned to it in sub-clause (ii) of clause (j) of section 2 of this Act, as it stood prior to its amendment by section 2 of the U.P. Act XIX of 1956.'" Section 31 makes sales-tax exigible from an assessee who has opted to pa.y tax on the turnover of the previous year, as if the altered rates were in force during the previolls year. The turnover of the previous year must therefore be broken up. the new rate of tax being applicable proportionately for the

(') [1961] 2 S.C.R. 189.

• ...

ame number of days in the previous year as were in force in the assessment year. The ameodment is retroactive, and applies to assessments pending or closed, as if the validating Act had be<:n in force at the material date.

This Court had in the Modi Sugar Mills Ltd.'s case(') held that where the assessee had elected to submit his return on the turnover of the previous year under s. 7 of Act 15 of 1948 as amended by Act 25 of 1948 he was liable to be assessed to sales-tax at the rate in force on the first day of the year of assessment, because the liability arises on that date, and any subs..'quent enhancement of the rate by virtue of a notification under s. 3-A does not alter that liability. The view expressed by the Court has been modified by express legislation operative retrospectively. The liability to tax of the turnover of the previous year which is regarded as the fictional turnover of the year of assessment has to be determined on the basis that the rates applicable in the year of assessment were fictionally projected on the taxable turnover.

Mr. Kapur appearing on behalf of the respondent company submitted that in answering the question referred by the Judge <Revisions) this Court was bound to give its opinion in the light of the Jaw applicable to the transaction as it prevailed at the date on which the reference was made and not of any subsequent amendment of the Act. Counsel submits that as the High Court exercises an advisory jurisdiction, so does this Court in appeal against the order of the High Court, and its advice can only be tendered on the question referred and in the light of the law as was applicable at the date when the reference was made. Counsel says that if the Jaw as amended is to be taken into consideration, in substance this Court would be answering a question other than the one which was referred by the Judge cRevisions) Sales Tax. In our view there is no

bstance in this contention. The qnestion referred to the High Court posed a problem as to the liability of the respondent rompany to l><! assessed for the assessment year I 948-49. Two rival views \\-ere propounded before the Judge (Revisions) Sales Tax. One was that the rates applicable to the fictional turnover for the year of assessment were those prevalent in the year 1948-49 and for the purpose of assessment they had to be applied to the turnover in the same proportion in which they. would have applied if the option had not been exercised.

That was the contention of the Sales Tax Department. The contention of the assessee was that having opted for the turnover of the previous year, the rates applicable to the turnover would be crystalised on the first day of the year of assessment and any modification since the commencement of the year in the rates would be inapplicable. This Court in the Modi Sugar

(') [1961] :!, S.c.R. 189.

Comniissioner of Salu Tax, U.P.

Biili Collon llilla,

Hathras

Shah, J.

Commiuioner of

Bal" Tax, u.J!.

Bijli Cott.on Mills,

Batlaras

Bliak, J.

Miils Ltd.'s case(') accepted the contention raised by the assessee. But for the amendment, the question which was posed by the Judge (Revisions) Sales Tax would have to be answered as it was answered by the High Court. The Legislature has. however, am.ended the Act and has declared that notwithstanding the option exercised by the assessee the tax would have to be computed in the light of the rates prevailing in 1948-49 as if they were projected upon the turnover of the previous year.

The Legislature has expressly stated that this rule will prevail as if it was in force during the assessment year and all assessments will be made in the light of this amended rule. In answering the question which was submitted by the Judge (Revisions) Sales Tax, therefore, the law enacted by the Legislature is the law found incorporated in s. 31 by Amending Act Ill of

1963. This Court in giving its opinion on the question in the light of the amending Act is seeking to apply a legislative provision which was, by express enactment, in force at the time when the liability arose, fer s. 31 enacted by Act III of 1963 is to be deemed to ha.ve been in operation at all material times in supersession of the previous rule declared by this Court.

This Court is, therefore, not seeking to apply any law to the question posed before the High Court which was not in force on the date of the transaction which is the subject-matter of the reference.

The following observation made by Jagannadhadas J., in Messrs Chatturam Horilram Ltd. v. Commissioner of lncometax, Bihar and Orissa(') on which reliance was placed by counsel for the respondent company:

"The High Court's jurisdiction was only to answer the particular question that was referred to it by the Income-tax Appellate Tribunal and it is extremely doubtful whether they could ha.ve taken notice of a subsequent legislation and answered a different question.",

dos not suggest a different rule. In Messrs Chatturam Hori/- ram Ltd.'s case(') a previous assessment to income-tax of the assessee fell through because the Indian Finance Act of 1939 was not in force iii Chota Nagpur area where the assessee was carrying on business during the relevant assessment .year.

Thereafter Bihar Regulation IV of 1942 was promulgated by • the Governor of Bihar with the assent of the Governor-General and thereby the Indian Finance Act of 1939 was brought into force in Chota Nagpur retrospectively as from March 30, 1939.

On February 8. 1944, the Income-tax Officer issued a fresh notice under s. 34 of the Indian Income-tax Act, 1922. which resulted in the assessment of the appellant to income-tax. and the question which fell to be determined was whether the

(') [1961) 2 S.C.R. 189.

notice was properly issued under s. 34 of the Act. It was argued 1961 that when the High Court answered the earlier reference which Commi&ioner o/ negatived the claim of the Revenue to assess the assessee, Bihar Sal .. Ttn. U.P.

Regulation IV of 1942 had in fact been enacted, and if the Bijli cart... Mill<, High Court had applied that Regulation the result would have Hatkra• been different, and in meeting that argument the Court observ- - ed that it was doubtful if the High Court had jurisdiction to Shah, J. take into consideration the 'ubsequent legislation for answering a question other than the one which was actually raised.

The doubt expressed was therefore in respect of the power of the Court to decide a question other than the question which was actually referred and not in respect of the power and indeed the duty of the High Court to apply to the question referred the law enacted with retroactive operation.

In support of his contention Mr. Kapur relied upon the observation of Desai, C.J ., in MI s Rampur Distillery Chemical Works Ltd. v. The Commissioner of Income-tax, U.P.(') to the following effect:

"The argument was that though the High Court has to answer the question referred to it with reference to the law in force in 1957 (when the Tribunal disposed of the appeal), what that la, w was has to be discovered today with reference to the law existing today. What was the law in 1957 on the basis of which the Tribunal disposed of the appeal has certainly to be decided by this court today but what has to be decided is the la.w existing in 1957 and not deemed to exist in 1957 by virtue of an amendment in the law made in 1962."

But in that case, in the view of the High Court the amendment made by the amending statute of 1962 which came into force after the reference was made by the Income-tax Tribunal had no retrospective operation, and the question referred by the Tribunal had to be answered by the High Court in the light of the relevant law applicable at the date of the transaction.

The observation relied upon has to be read in the context of the finding of the High Court as to the character of the amending legislation. The observation therefore does not assist the contention that even in cases where the relevant statute has been amended with retroactive operation. so as to apply to the transa.ction which forms the subject-matter of the reference. and the High Court or this Court is bound in recording its opinion on the question referred to ignore the amended la;;,,. If what counsel contends is true. the answer given by the High Court or by this Court would have no value whatever in cases where by retroactive amendment of the law, the old law has

(') LT. Reference No. 362 of 1958 decided on Jan. 17, 1964.

Comminim1er of Balu Tax, U.P.

"· Bijli 08"'"' Jlilla,

HatMM

Shah, J.

been superseded and is substituted by a new statutory provision. Undoubtedly the Tribunal called upon to decide a taxing dispute must apply the relevant Jaw applicable to a particular transaction to which the problem relates. and that Jaw normally is the law applicable as on the date on which the transaction in dispute has taken place. If the Jaw which the T n'bunal seeks to apply to the dispute is amended, so as to make the law applicable to the transaction in dispute, it would be bound to decide the question in the light of the Jaw so amended. Similarly when the question bas been referred to the High Court and in the meanwhile the Jaw has been amended with retroactive operation. it would be the duty of the High Court to apply the Jaw so amended if it applies. By taking notice of the Jaw which has been substituted for the original provision, the High Court is giving effect to legislative intent and does no more than what must be deemed to be necessarily implicit in the question referred by the Tnl>unal, provided the question is conched in terms of sufficient amplitude to cover an enquiry into the question in the light of the amended Jaw, and the enquiry does not necessitate investigation of fresh facts. If the question is not so couched as to invite the High Court to decide the question in the light of the Jaw as amended O£ if it necessitates in~-esti gation of facts which have not been investigated, the High Court may refuse to answer the question. Application of the relevant Jaw to a problem raised by the reference before the High Court is not normally excluded merely because at the date when the Tnl>unal decided the question the relevant Jaw was not O£ could not be brought to its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts that in deciding it the High Court is restricted to the application of the Jaw which has been superseded by legislation since the date when the reference was made by the Tax Tribunal and is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the subject-matter of the reference.

On the view taken by us this appeal must be allowed and the question raised by the Judge <Revisions) Sales Tax must be answered in the affirmative. Having regard to the circumstances of the case, the parties will bear their own costs both in this Court and the High Court.

Appeal allowed.

383

COMMISSIONER OF SALES TAX, U

BIJLI COTTON MILLS, HATHRAS

IP. B. GAJENDRAGADKAR, C.J.

c. SHAH

N. RAJAGOPALA AYYANGAR

S. M. SIKRI, JJ.

Sales Tax-Reference under Act

Tax Act, 1948

ss. 3A, 31

Sales Tax Act, 1948

April 1, 1948

s. 3(A)

Government of U.P.

June 9, 1948

Modi Food Products Ltd.

s. 7

legislature of Uttar Prade5h

s. 31

s. 31

Amending Act III of 1963

s. 31

Modi Sugar Mills Ltd.

1955] 2 S.C.R. 290

C. B. Agarwala

C. P. Lal

S. K. Kapur

S. K. Mehta

K. L. Mehta

SHAH

-Bijli Cotton Mills

Sales Tax Act

Sales Tax Act

March 31, 1948

s. 3

June 9, I 948

June 9, 1949

Uttar Pradesh

Hathras

s. 7

High Coutt of Judicature at Allahabad

Commissioner of Sales Tax, U.P.

SluJh

S!iah

s. 7

section 30

section 31

section 7

section 7

section 7

section 7

section 2

section 2

Section 31

[1961] 2 S.C.R. 189

s. 7

s. 3

Kapur

Bliak

s. 31

s. 31

Jagannadhadas

Messrs Chatturam Hori/- ram Ltd.

Chota Nagpur

Thereafter Bihar Regulation

March 30, 1939

February 8. 1944

s. 34

Indian Income-tax Act, 1922

[1961) 2 S.C.R. 189

s. 34

High Court had applied that Regulation

Shah

Desai

Jan. 17, 1964

Income-tax Act


7 S.C.R.

SUPREME COURT REPORTS 391

MALAYALAM PLANTATIONS LTD. v.

THE DEPUTY COMMISSIONER OF AGRICULTURAL

INCOME-TAX AND SALES TAX [P. B. GAJENDRAGADKAR, C.J .. K. N. WANCHOO, J. c. SHAH, N.

RAJAGOPALA AYYANGAR AND S.M. SiKRI, JJ.]

Sales Tax-Tea sold bu auction at Fort Cochin which was outside State of Travancore-Cochin-Whether to he included in turn-over for purposes of Sales-tax-"Outside Sale"-Meanina of-Doctrine of territorial nexus in Sales Ta.r legis!ation- Point not urged in High Court or taken up in Statement of case-It can be taken up in Supreme Court-Constitution of India, Art. 286(i)(a} before and after the Constitution (Sixth Amendment) Act, 1956-Travancore-Cochin General Sales Tax Act. 1950, s. (J).

The appellant company owns several estates wherein tea is grown and it was assessed to sales-tax by the Sales Tax Officer in respect of the tea sold by 1t during the years 1954-55 and 1955-56. An appeal filed by the appellant was rejected bv the Appellate Assistant Commissioner on the ground that the tea when sold was admittedly in godowns in the State of Travancore-Cochin and that consequently the sales must be deemed tc have taken place within tl:e State of Travancore-Cochin and hence liable to be included in the taxable turn-over. When a further appeal was taken to the Sales Tax Appellate Tribunal. it was held that the property in the goods sold passed at Fort Cochin in Madras State on the fall of the hammer at the auction and hence the same was not taxable. The State filed a revision petition to the High Court. While the High Court accepted the finding of the Tribunal that the property in the goods sold passed at Fort. Cochin on the fall of the hammer at the auction. it differed from the Tribunal as regards the effect of the circm!'- stance that the tea sold was. at the point of sale, physically in godowns situated in the State of Travancore-Cochin and held the sales to be taxable. The appellant cam<> to this Court after obtaining a certificate of fitness from the High Court.

The onlv question argued before this court was whetter a sale of tea effected by the appellant by auction at Fort Cochin in Madras State wa• a sale outside the State of Travancore- Cochin or inside it and whether the same was taxable or not. • Accepting the appeal.

HELD: No sales tax was to be levied in this case as the sales took place outside the State of Travancore-Cochin. The test for determining whP.ther a sale is inside or outside a State is \\here the property in the goods passed and in the present case the property in the goods passed in Fort Cochin in Madras State on the fall of the hammer at the auction.

The point about the property not having passed in the Madras State was not argued before the High Court and was also not urged in the statement of case filed by respondent and hence the same was not allowed to be argued in the Supreme Court.

Per Shah. J. The property in the goods passed at Fort Cochin in Madras State and as the goods were delivered not for the purpose of consumption in any particular State, the sales were not inside Travancore-Cochin but were outside the

March 20

Malayalam Planfa.

tions Ltd.

TheDepuly Commisaioner of

Agricultural Incomttax and

Salea Taz

State and were as held by this Court in A. V. Thomas & Co. v.

Deputy Commissioner of Agricultural Income-tax and Sales Tax Trivandrum, 14 S.T.C. 363, not liable to be taxed under the Travancore-Cochin General Sales Tax Act, 1950.

The doctrine of territorial nexus had full play in sales tax legislation under the Government of India, Act, 1935 and was not abrogated by the enactment of Art, 286 of the Constitution.

It continued to be in operation in the interregnum between the promulgation of the Constitution and the amendment of Art. 286 by the Constitution (Sixth Amendment) Act. 1956. It also applies now subject to certain modifications.

Par Jiament has been given the power to formulate principles for determining when a sale or purcl:ase of goods takes place outside the State or in the course of the import of the goods into or export of the goods out of the territory of India. Exercising the power und.er

cl. (2) Parliament has enacted the Central Sales Tax Act, 1956 and by s. 4(2) the doctrine of territorial nexus has been given legislative recognition th<mgh in somewhat limited form.

Deputy Commissioner of Agricultural Income-tax and Salestax. Trivandrum v. A.V. Thomas & Co., I.L.R. 1960 Kerala 1395; India Cower Corporation Limited v. State of Bihar, [1961] 2 S.C.R. 276; A. V. Thomas & Co. Ltd. v. Deputu Commissioner of

.4.griultural Income-tax and Sales-tax, Trivandrum 1953 Supp. 2 S.C.R. 608 363; Poppat Lal Shah v. The State of Madras, r1953] S.C.R. 677; and the Tata Iron & Steel Company Ltd. v. The

State of Bihar [1958] S.C.R. 1356. referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 678 and 679 of 1963.

Appeals from the judgment and order dated April 4, 1961 of the Kerala High Court in Tax Revision Nos. 52 & 53/1959.

G. B. Pai, T. N. Ramachandra, J. B. Dadachanji, 0. C.

Mathur and Ravinder Narain, for the appellants (in all the appeals).

Govinda Menon a.nd V. A. Seyid Muhammad, for the respondent (in both the appeals).

C. S. Pathak, S. N. Andley, Rameshwar Nath and P. L.

Vohra, for the interveners (in both the appeals).

March 20, 1964.

The judgment of GAJENDRAGADKAR, C.J., WANCHOO, RAJAGOPALA AYYANGAR AND SIKRI, JJ. was delivered by AYYANGAR J. SHAH, J. ddivered a separate Opinion.

Ayyanga,, J.

AVYANGAR, J.-The appellant owns several estates wherein inter alia le~ is grown and was assessed to sales-tax in respect of the tea sold by it during the years 1954-55 and 1955-56, by the Sales Tax Officer, First Circle, Quilon in the State of Travancore-Cochin by his order dated December 23. 1956.' In the taxable turnover on which sales tax was computed by the assessing authority were included two items which are the subject of complaint in these two appeals which relate to these two years of assessment. Before the aSsessing officer the appellant claimed that certain sales of its tea which were

conducted by auction at Fort Cochin-a place which at the relevant date was in the Madras State. were sales "outside"

the Travancore-Cochin State and that consequently these sales were exempted from taxation by the State of Travancore-Cochin under Art. '286(1)-(a) of 1the Constitution. The Sales Tax Officer rejected this contention and included the sum involved in these sales in the taxable turnover. An appeal filed to the Appellate Assistant Commissioner also failed, this authority holding that as the tea sold was, at the date of the auction, admittedly in godowns in Willingdon Island in the State of Travancore-Cochin, the sales must be deemed to ha.ve taken place within taxing State by virtue of a provision in the State Sales Tax Act to which we shall refer later and hence liable to be included in the taxable turnover. There was a further appeal taken by the Appellant to the Sales Tax Appellate Tribunal which upheld the appellant's contention and set aside the assessment in so far as it included the turnover relating to the auction sales of tea held at Fort Cochin, this turnover amounting to Rs. 56,43,184111 /- in regard to the assessment year 1954-55 and Rs. 62,13,60413/- in regard to the assessment year 1955-56 and remanded the case for fresh disposal by excluding these sums from the computation of the taxable turnover. A revision petition was thereafter filed before the High Court by the State under s.

I 5(b) of the General Sales Tax Act of Travancore-Cochin and the learned Judges allowed the Revision and upheld the order of the assessing officer and the Appellate Commissioner holding the turnover represented by these auction sales to be validly taxable under the State law relating to sales tax. The appellant thereafter applied to the High Court for a certificate of fitness and this having been granted the appeals are now before us.

Before proceeding further it is necessary to set out the statutory provision contained in the taxing enactment of the

State. The General Sales Tax Act (Act XI of 1125 (ME) 1950) which imposed a sales tax on sales by dealers defines a "sale" by s. 21j) in these terms:-

" 'Sale' with all its grammatical variations and cognate expressions means e.very transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge;

x x x x Explanation (2) Notwithstanding anything to the contrary in the Sale of Goods Act for the time bein& in

Maklyalam Plantations Ltd. v.

The Deputy Commissioner of Agricultural Income-tax and

Sale8 Ta:z

Ayyangar, J,

Malayalam Plantations Ltd.

The De:puty !)ommisswner of

Ayrkultural Income-tax and

Srles Tax

force, the sale or purchase of any goods shall be deemed for the purpose of this Act, to have taken place in the State wherever the contract of sale or purchase might have been made (a) if the goods were actually in the State at the time when the contract of sale or purchase in respect thereof was made; or (b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in the State at any time after the contract of sale or purchase in respect thereof was made." When the Constitution came into force a new section numbered s. 26 was inserted by the Adaptation Order bringing the Act into line with Art. 286(1) of the Constitution and this read:-

"No law of a State shall impose, or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place-

(a) outside the State or (b) ................................ .

Explanation-For the purposes of sub-clause (a) a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the consumption in that State, notwithst, anding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale "or purchase passed in another State." The position, therefore, was that though cl. (a) to Explanation 2 to s. 2(j) enacted that "notwithstanding anything contrary in the Sale of Goods Act, the sale or purchase of goods shall be deemed to take place in the State if the goods were actually in the State at the time the contract for sale or purchase of goods thereof was made", still by the non-obstante provision contained in s. 26 a tax on the sale or purchase of goods could not be imposed where such sale or purchase took place "outside" the State of Travancore-Cochin. It is only necessary to add that even if s. 26 were ignored still by the terms of Art. 2860)(a) the position would be the rnme and the State could not validly levy a tax on a sale which is "outside" that State.

Now the question is can a sale of the tea effected by the Appellant by auction at Fort Cochin and which were included in its taxable turnover be. said to be "outside" the State? The facts in relation to the transaction relating to the sale of the.tea and which the learned Judges of the High Court held not to be an "outside" sale may be stated in their own words: -

"The sales of teas were concluded at Fort Cochin and the goods were stocked in godowns situated in the

Travancore Cochin State. The deliveries of the goods were also made to the buyers from the godowns in Willingdon island in the Travancore Cochin State. The Appellate Tribunal has come to the conclusion that the ownership of the commo dity having passed in Fort Cochin, the property had not passed within the taxing State, accordingly they would be 'outside' sales for purpose of Art. 286(1) and exempt from taxation." The Appellate Tribunal had recorded a finding that the property in the goods sold passed at Fort Cochin on the fall of the hammer at the auction and the learned Judges of the High Court proceeded on the same basis. The point on which the. learned Judges differed from the Tribunal was only as regards the effect of the circumstance that the tea sold, was at the point of sale, physically in godowns situated in the State of Travanc:ore-Cocbin. The Appellate Tribunal bad, in reaching the con clusion in favour of the appellant, as to the taxable character of the turnover represented by these auction sales, referred to a large number of decisions of this Court and to the observations contained in them as well as to several decisions of the various High Courts. When the matter came up before the High Court the position was, that that Court bad after a review of most of the earlier caSes which had been referred to by the Tnlmnal, held in Deputy Commissioner of A gricu/tura/ Income-tax and Sales-tax, Trivandrum v. A.V. Thomas & Co.(') that the word 'outside sale' in Art. 286(1)(a) bad no reference exclusively to the transfer of the property in the goods according to the provisions of the Sales of Goods Act, and therefore. that Explanation 2 to s. 2(j) was not violative of Art. 286(l)(a) and that if at the moment when the property passed, it r.ot being very relevant where the property passed, the goods were in the State of Travancore-Cochin, then it was not an "outside" sale quoad Travancore Cochin and could be subjected to salestax by that State. Before the learned Judges a decision of thi~ Court in India Copper Corporation limited v. State of Bihar.(') was however relied on as leading to a different result but the learned Judges held that the decision of this Court could be distinguished on the facts and they held that their previous deci: sion reported in A.V. Thomas's case(') was still good law and entirely covered the point raised.

The question for consideration in the appeal is the correctness of the view expressed by the High Court. The decision in Deputy Commissioner of Agricultural Income-tax and Sa/estax, Trivandrum v. A. V. Thomas & Co.(') was brought before this Court on appeal and has been reversed <See A. V. Thomas & Co. Lid. v. Deputy Commissioner of Agricultural Income-tax and Sales-tax, Trivandruni('). In so doing this Court pointed

Malayfl/am PlanlatioMLttl.

Tll<Deputy Oommi4Biomt o/

.Agricu/lural 1-.ta.:alld

BakaT...,

.Ayyangar, J.

Malayalam Planlali<>n• Lkl.

TkeDepuly Oommia&iomr of Agricultuml Jncome.la3; and

i:Jak4 p..,,

Agyangar, J.

out that the decision of this Court in the Indian Copper Corpormion case(') had settled the Jaw by laying down that the State (other than a "delivery-cum-consumption" State) which could tax a 'non-explanation sale' (to adopt the phraseology used in these cases to identify a sale falling outside the explanation to Art. 286(l)(a)) could only be that State in which the property in the goods passes. Now, as regards the facts, there is no distinction between the facts in the A. V. Thomas's case(') and the case now under appeal and, indeed, the learned Judges of the High Court have proceeded on that basis. Dealing with the question as to what is an "outside" sale Kapur, J. speaking for the Court said in the case of A. V. Thomas & Co.(') Ltd.: -

"It has been found and it has not been disputed that the title to the goods in the present case passed at Fort Cochin ............ the question is whether the sale was 'outside sale' or 'inside sale' as the expressions have been compendiously used in various judgments to indicate sales taking place within a State or without it. The Explanation to Art. 2860)-

(a) . .. .. . .. .. .. . . . explains what a sale outside the State is . .. .. . . . . . . . where the Explanation applies the difficulty about the situs is resolved but in a case like the present one the difficulty still remains because the Explanation does not operate in the sense that the rival States claiming to tax the same taxable event are not the States of delivery for consumption in that State and those where the title in the goods passes." After referring to the decision in the India Copper Corporation Ltd. v. State of Bihar (') the Court held that the sale in the case before them was an "outside" sale quoad Travancore- Cochin, because the title passed at Fort Cochin in the State of Madras. On this reasoning this Court reversed the decision in the case of the High Court and held that the sale there in question being an "outside" sale was not taxable by reason of the prohibition contained in Art 286(l)(a).

Dealing with the connotation of the expression 'outside' in Art. 286(1)(a) this Court had observed, in India Copper Corporation Ltd. v. State of Bihar.(') :-

"If a single State was designed to have the power to tax any particular transaction of sale, the question that next falls to be considered is the determination of that State in regard to which it could be predicated that the sale in question was not 'outside' that State or in other words, the determinati!Jn of the

particular State in regard to which it could be said that the sale was 'inside' that State. The key to the problem is afforded by two indications in the Article itself: (l) the opening words of Article 286(1) which speak of a sale or purchase taking place and (2) the non-obstante clause in the Explanation which refers to the general law relating to 'sale of goods under which property in the goods has, by reason of such sale or purchase, passed in another State'. These two together indicate that it is the passing of property within the State that is intended to be fastened on, for the purpose of determining, whether the sale in question is 'inside' or 'outside' the State, and therefore subject to the operation of the 'Explanation' that State in which property passes would be the only State which would have the power to levy a tax on the sale. As was explained in the recent decision of this Court in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. The Commercial Tax Officer." It was the principle of law laid down in this passage that was given effect to by this Court in A. V. Thomas's case(') and it was on this basis that the appeal was allowed. It would therefore ifollow that the present appeals which are wholly dependent on the correctness of the meaning of the expression 'outside sales' in Art. 286(1)(a) which High Court adopted in A. V. Thomas's case have necessarily to be allowed.

Learned Counsel for the respondent-State, however, urged that in the present case a point had been raised before the High Court as to whether on the facts the property in the goods sold by auction conducted at Fort Cochin really passed at Fort Cochin in the Madras State or whether it passed in Willingdon island in Travancore-Cochin when the goods were actually delivered to the buyer. As regards this question of fact or of mixed fact and law the position is this. The Sales Tax Appellate Tnlmnal recorded a finding on this matter in these terms:

"The question whether the sales took place outside the

State or not will have to be decided on the basis of the general Jaw relating to sale of goods. We hold that in the case of auction sales of full lots the sales were of ascertained goods and henc~ became complete on the fall of the hammer and that the sales took place within the Madras State."

In the revision application which the department filed to the High Court this question whether the property in the goods

Malayalam Planllllionl Ltl.

•• Pit< Dtpvtg Commisrimw of

Agricoltuml Income-tax and

Salu Ta:t

196l

.Malayalam .Planratiom Lid.

The Deptdy Oommissiontr of Agricultural

Income-tax and Sales Tax

., Agya11gar, J.

f,/w.Ji, J.

did pass at Fort Cochin was raised but nevertheless the argument before the High Court proceeded wholly on the basis. of the correctness of the finding by the Appellate Tribunal that the property in the teas did pass on the fall of the hammer at Fort Cochin. The point about the property not having passed in the Madras State does not appear to have been even argued before the High Court. Even in the statement of the case filed by the respondent it is not stated that this point about the property not having passed at Fort Cochin in Madras was urged before the High Court during the course of the argument. Before concluding it might be mentioned that in A. V. Thomas's case

isupra) where, as we have stated earlier, the nature of the transaction was identical with the one in the appeals before us this Court observed: -

"It has been found and it has not been disputed that the title to the goods in the present case passed at Fort Cochin."

In these circumstances, we declined to pennit learned Counsel for the respondent to urge any ground relating to the property in the goods in the teas sold not having passed in Fort Cochin in the Madras State to be raised, as the point which is not one of pure law was not urged before the learned Judges of the High Court.

The appeals are, therefore, allowed and the order of the High Court reversed and that of the Sales Tax Appellate Tribunal restored. The appellant will have his costs here and in the High Court-one hearing fee.

SHAH. J.-If the question raised in these appeals were res integra, I would hold that the price obtained at auction sales of tea held at Fort Cochin when the goods were lying in war~ houses in the Travancore-Cochin State was liable to be taxed under the General Sales Tax Act 01 of 1125 M.E.), for in my view Art. 286(!)(a) Explanation, before it was amended by the Constitution (Sixth Amendment) Act, did not altogether exclude the doctrine of territorial nexus in its application to salestax legislation. It is settled law in this Court that tonder the Government of India Act, 1935, the Provincial Legislatures could, relying upon the territorial nexus, levy sales-tax upon transactions of sale, not wholly completed within their territory. fixing upon one or more ingredients of a sale furnishing a territorial connection with the taxing Province: Poppat Lal Shah v. The State of Madras(') and The Tata Iron & Steel Company Ltd. v. The State of Bihar ('). By the Constitution certain restrictions were placed upon the power of the States

(') [1953] S.C.R. 677.

(') [1958] S.C.R. 1356.

7 S.C.R

SUPRE.11E COURT REPORTS 399

lo legislate in respect of taxes on sales and purchases. By Art. 286(l)(a) read with the Explanation, an Explanation sale i.e. a sale in which goods sold were actually delivered in a State for the purpose of consumption in that State was made taxable only by the State in which the goods were delivered for consumption. But Art. 286 was, in my view, not intended to exclude the operation of the doctrine of territorial nexus in the field not covered by the legislative prohibitions. In dealing with the effect of s. 33 of the Bihar Sales Tax Act which in- -corporated the prohibitions imposed by Art. 286( I) & m.

with the concurrence of S. K. Das J., it was observed by me in Indian Copper Corporation Ltd. v. The State of Bihar and .others(') at p. 293: -

• " x x x by enacting that a tax shall not be imposed under the Act when the sale takes place outside the State of Bihar x x,

"Only the power to tax "Explanation sales"' which do not take place within the State of Bihar is taken away, but not the power to tax "non-Explanation sales" in which though under the general law of sale of goods the property passes outside the State, there exists between the taxing power of the State and the sale a nexus as contemplated by the definition of sale in s. 2(g). If the sale is one in which the goods have been delivered outside the State of, Bihar, but not as a direct result of the sale or not for the purpose of consumption in the State Of

first delivery, the sale will not be covered by the Explanation, and the right to tax the sale, if arising otherwise under the Act relying upon the territorial nexus, will not be impaired by the prohibition imposed by cl. (l)(a)(i) of s. 33."

It may be mentioned thats. 33 of the Bihar Sales Tax At was enacted to give effect expressly to the legislative restrictions imposed by Art. 286 of the Constitution. In Indian Copper Corporation Ltd.'s case(') certain transactions of sale were effected by the assessee after the promulgation of the Constitution, under which the property in the goods passed in the

State of Bihar but delivery was effected outside the State of Bihar for consumption also outside Bihar. In some cf these transactions goods were delivered in the State of first destination for consumption therein whilst in others the goods were delivered not for consumption in the State of first delivery.

The assessee contended that both these categories of transactions were exempt from tax under Art. 286(1)(a) as they were

196J

Malayalam Plan.tatiOfl' Lid,

The Deputy Commissioner of Agricultural

Income-tax and Bale~ Taz

Shah, J.

Malayalam Planlalions Lid.

The Deputy Commissi-0ner

of AgricuJ, fural

Jn, come-ta.r and Sales Tax

Slush, J.

400 SUPREl\fE COURT HEPORTS [1964]

outside sales. This Court unanimously negatived the contention of the assessee in respect of sales in which delivery in the State of first destination was not for consumption therein, and the transactions were on that account not "Explanation sales".

It was held that the State of Bihar was competent to tax those "Non-explanation sales" in which the property in the goods had passed in the State of Bihar. But two "different grounds were given in support of the conclusion in that case. My brethren Hidayatullah, Das Gupta and Rajagopala Ayyangar, JJ., were of the view that passing of property within the State alone was intended after the Constitution to be fastened upon for the purpose of determining whether the sale is inside or outside the State, and therefore subject to the operation of the Explanation that ;')tale in which the property passes would be the only State, which had the power to tax the sale. S. K.

Das, J., and .I were of the view that sale transactions not falling within the constitutional prohibitions remained taxable because in adjudging whether a "non-Explanation" sale-transaction was "outside the State", the doctrine of territorial nexus could not be wholly excluded from consideration.

In a recent judgment of this Court in A.V. Thomas & Co.

Ltd. v. Deputy Commissioner of Agricultural Income-tax ana

Sales-tax, T rivandrum(') this Court held in construing Art. 286(l)(a) in the light of the Explanation before that Article was amended by the Constitution (Sixth Amendment) Act. that:- I

"Where the Explanation to Article 286(l)(a) of the Constitution of India is inapplicable, it is the 'pas" sing of property within the State' that is intended to be fastened on for the purpose of determining whether a sale is 'inside' or 'outside' the State.

Therefore subject to the operation of the 'Explanation', that State in which the property in the goods passes would be. the only State which would have the power to levy a tax on the sale."

In A. V. Thomas & Co. Ltd.'s case(') chests of tea 'were stored in warehouses at Willingdon Island in the Travancore- Cochin State, but auctions of the tea chests were held at Fort Cochin which was at the material time within the State of Madras, and after the price was paid at Fort Cochin delivery orders were given to the purchasers addressed to the warehouse-keepers at Willingdon Island and actual delivery was given at the warehouses. The chests of tea were then sent from Willingdon Island for consumption in other parts .of India or were exported out of India. It was held, by the Court in that

I. \

. . • .· .. _ .....

. "·.

' . . . ~-

'_ .,:;) -, , ' \

-.-,:i S.C.R;' 'suPREME COURT REPORTS __ 401 --·.

case tht the property in the goods pased .at Fort Cochin and as the goods were delivered not for the purpose of. C<?nsumption in any particular State, the sales were not ms1de the

State of Travancore-Cochin but were outside that State and were not liable to be taxed under the Travancore-Cochin General Sales Tax Act (11 of 1125 ME). The Court observed that in sales which were not "Explanation sales" passing of property within the State was decisive of the liability to pay sales-tax. No opinion was expressed on the question whether the doctrine of territorial nexus as investing the State with the right to tax a. sale transaction outside the legislative restridions imposed by Art. 286, was, since the promulgaticin _of the Constitution,· rendered ineffective. As the fact which' give rise to this case are substantially the same as the facts on which

A. V. Thomas & Co. Ltd.'s easel') was decided, the decision of the appeals must be in favour of the assessee:

It is'necessary to record this judgment, Jest it be assumed that I agree with the view that the doctrine of territorial nexus in its application to sales-tax legislation has. since the enactment of the Constitution, been completely abrogated. It may be pertinent to note that since the amendment of the Constitution by the Constitution (Sixth Amendment) Act, Art. 2860)-

(a) (which remains unamended) is now free from the shackles of the Explanation which is deleted and by cl. (2) the Parliament is invested with power to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in cl. (I), namely, outside the State or in the course of the import of the goods into, "or export of the goods out of, the territory of India. Exercising the power under cl. (2) the Parliament has enacted the Central Sales Tax Act (74 of 1956), and bys. 4(2) the doctrine of territoriaI nexus has been given legislative recognition, though in somewhat limited form. That sub-section provides: -

"A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the- State-

(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and

196l

Malayalam PlawJations Lttl~

The Deyuty Commissioner of .Agricultural

lncome-taJ: and SakaT<n

Shah, J.

(b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.

Explanation.-Where there is a single contract of sak

or purchase of goods situated at more places than (') [1963] Supp. 2 S.C.R. 608.

Ma!ayalani Planlatiom Ltd.

The De,,, Wy Commissumer of .Agricultural

income-tax and Sales Tax

Shah, J.

one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each uf such places."

The doctrine of territorial nexus had full play in sales-tax legislation under the Government of India Act, 1935: it also applies subject to certain modifications since the amendment of the Constitution by \he Constitution (Sixth Amendment) Act. And I am unable to persuade myself that by the enactment of Art. 286 of the Constitution, it stood abrogated in the interregnum between the promulgation of the Constitution and the amendment of Art. 286 by the Constitution (Sixth Amendment) Act.

Appeal allowed.

391

MALAYALAM PLANTATIONS LTD

P. B. GAJENDRAGADKAR, C.J

K. N. WANCHOO, J.

c. SHAH

RAJAGOPALA AYYANGAR

S.M. SiKRI, JJ.

Constitution of India

Travancore-Cochin General Sales Tax Act

Travancore-Cochin

Sales Tax Appellate Tribunal

Fort Cochin

Madras

Cochin

Travancore- Cochin

Supreme Court

Shah

Madras State

Malayalam Planfa.

tions Ltd.

Art. 286

India

s. 4(2)

[1961] 2 S.C.R. 276

G. B. Pai

T. N. Ramachandra

J. B. Dadachanji

C.

Mathur

Ravinder Narain

Govinda Menon

V. A. Seyid Muhammad

C. S. Pathak

S. N. Andley

Rameshwar Nath

P. L.

Vohra

GAJENDRAGADKAR

WANCHOO

RAJAGOPALA AYYANGAR

SIKRI

AYYANGAR J. SHAH

Ayyanga

AVYANGAR

December 23. 1956

Travancore

Willingdon Island

-Cochin

s. 21

s. 26

Art. 286(1)

s. 2(j)

Sale of Goods Act

s. 26

s. 26

Art. 2860

Travancore Cochin

Willingdon island

Art. 286(1)

Travanc:ore-Cocbin

Tnlmnal

Art. 286(1)(a)

s. 2(j)

Art. 286(l)(a)

A.V. Thomas

.Ayyangar

Agyangar

Art. 286(l)(a)

A. V. Thomas

Kapur

Art. 2860

Art 286(l)(a)

Art. 286(1)(a)

Article 286(1)

Art. 286(1)(a)

Tnlmnal

SHAH

Art. 286(!)(a)

Art. 286(l)(a)

Art. 286

s. 33

Art. 286( I)

S. K. Das

Bihar

s. 2(g)

s. 33

Art. 286

Indian Copper Corporation Ltd.

Art. 286(1)(a)

State of Bihar

Hidayatullah

Das Gupta

Rajagopala Ayyangar

S. K.

Das

Art. 286(l)(a)

Article 286(l)(a)

Constitution of India

A. V. Thomas & Co. Ltd.

Art. 286

Art. 2860

Central Sales Tax Act

SakaT<n

Shah

Art. 286

Art. 286


' .

7 S.C.R.

SUPRE'.IIE COURT REPOHTS 403

RADHEY SHY AM SHARMA

THE POST MASTER GENERAL CENTRAL CIRCLE

NAGPUR

[P. B. GA, JENDRAGADKAR, c. J., K N. WANCHOO, J. c. SHAH,

N. RAJAGOPALA AYYANGAR ANDS. M. SIKRI, JJ.]

Fundamental Right-Postal employee taking part in a demonstration in furtherance of the strike-Ordinance prohibiting strikes in any postal, telegraph or telephone service-Constitutionality of-Essential Services Maintenance Ordinance, No. 1 of 1960, ss. 3, 4 and 5--Constitution of India, Arts. 19(1)(a). J9(1)(b}.

The petitioner was serving as an officiating Teleprinter Supervisor at Jaipur when the employees of the Posts and Tele graphs Department went on strike from the midnight of July 11, 1960, throughout India and there was a similar strike at Jaipur. The petitioner's case was that he was on duty that day from 12 noon to B p.m. and aft€r his duty was over. he did not go home but went to the dormitory where he fell asleep as he was tired. On hearing some noise he woke up at 11-30 p.m. and wanted to go home but was arrested by the police under the Essential Services Maintenance Ordinance, No. 1 of 1960. The criminal charge was however withdrawn. On July 21, 1960, a charge. sheet was served on the petitioner in the following terms:

"That Shri Radhey Shyam Sharma I C/S Telegraphist,

CTO Jaipur committed gross misconduct in that on the mitlnight of the 11th July, 1960. he took part in a demonstration in furtherance of the strike of the P. & T. Employees in violation of the orders dated 8-7-1960

issued by the Government of India under the 'Essential Services Maintenance Ordinance, 1960 (1 of 1960)' prohibiting strikes in any Postal, telegraph or telephone service''.

The enquiry officer found him guilty of the charge and ordered that his pay should be reduced in the time scale by three stages for a period of two years and on restoration the period of reduc~

tion was not to operate to postpone his future increments. 0'1 appeal, the Director General considered the whole matter on merits and rejected the appeal. In this Court it was urged that the punishment imposed upon the petitioner was violative of his fundamental rights under Arts. 19(l)(a) and (b), reliance being placed on t\vo cases of this court in Ka1neshwar Prasad v. State

of Bihar and 0. K. Ghosh v. E. X. Joseph; that .ss. 3, 4 and 5 of the Ordinance were ultra-vires, as they contravened Art. I9(])(a) and

(b) and that in any case there was no evidence on which it could .- be found that the charge ai:ainst him had been proved . ..

Held: .The provisions of the Ordinance in ss. 3, 4 and 5 did not violate the fundamental rights enshrined in Art. 19(l)(a) and (b). A perusal of Art. 19(1) shows that there is no fundamental right to strike, and all that the ordinance provided was with respect to any illegal strike as provided in the Ordinance. There

was no provision in the Ordinance which in any way restricted those fundamental rights. It was not <in dispute that P:irliament had the competence to make a law in the terms of the Ordinance and therefore the President had also the power to promulgate such an Ordinance. ·

19G4

!-larch 23

1164.

Radhey BAyam

Sloarma

The P08tmaater General Central Circle. N01Jpur

Te competence of the legislature therefore being not in dispute 1t cannot be held that the Ordinance violated the fundamental rights guaranteed under Art. 19(l)(a) and (b).

. A!! India Bank EmployeetAssociation v. National Industrial Tribunal, [1962] 3 S.C.R. 269, referred to.

The two cases relied on by the petitioner have no relevance in connection with the charge in the present case. The punishment given to the petitioner cannot therefore be set aside on the ground that the charge was in violation of the fundamental rights guaranteed under Art. 19(l)(a) and (b).

Kameshwar Prasad v. State of Bihar, [1962] Supp. 3 S.C.R. 369 and 0. K. Ghosh v. E. X. Joseph, [1963] Supp. l S.C.R. 789, held inapplicable. If on the undisputed facts the authorities came to the ronclusion that the petitioner acted in furtherance of the strike which was to commence half an hour later and was thus guilty of gross misconduct, it could not be said that there was no evidence on which the authorities concerned could find the charge framed against the petititoner proved.

ORIGINAL JURISDICTION: Writ Petition No. 208 of 1963- Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights.

B. D. Sharma, for the petitioner.

S. V. Gupte, Additional Solicitor-General, S. P. Varma and R. H. Dhebar, for the respondent.

March 23, 1964. The Judgment of the Court was delivered by

Wanchoo, J.

WANCHOO, J.-This is a petition under Art. 32 of thte Constitution. The petitioner was appointed as a Telegraphist by the Post Master General Nagpur in 1949. In July 1960, he was serving as an officiating Teleprinter Supervisor at Jaipur. The employees of the Posts aµd Telegraphs Department (hereinafter referred to as the Department) went on strike from the midnight of July I I, 1960 throughout India and there was a similar strike at Jaipur. The petitioner was on duty on that day from

I 2 noon to 8 p.m. He says that after his duty was over, he did not go home but went to the dormitory where he fell asleep as he was tired. At about 11-30 p.m. he woke up on hearing some noise and discovered tha.t it was very late and then he wanted to go home. But as he came out, he was arrested by the police on the ground that he was also one of the demonstrators, who were, demonstrating outside in connection with the strike. The arrest was made under the Essential Services Maintenance Ordinance, No. 1 of 1960, (hereinafter referred to as the Ordinance).

On July 13, the petitioner was suspended on the ground that a criminal charge was pending against him in a criminal court.

However the criminal charge was withdrawn on July 18, 1960.

On July '21, 1960, a charge-sheet was served on the petitioner in the full owing terms: -

Radhey Skyam

SllMma

v. ' "That Shri Radhey Sh yam Sharma I CI S Telegraphist, CTO Jaipur committed gross misconduct in that on the midnight of ihe I Ith July 1960, he took part in a demonstration in flJ!thranc_e of the strike of the P. & T. Employees m v10lauon of the orders dated 8-7-1960 issued by the Government of India under the "Essential Services Maintenance Ordinance, 1960 (I of 1960)" prohibiting strike in any postal, telegraph or telephone Service."

The Postmaster General Central Cirde, Nagpur

An inquiry was made in the matter by the Post Master General, Central Services Nagpur to whom it was transferred _as the petitioner had been appointed by that officer. The enqmry officer found the petitioner guilty of the charge framed against him and thereupon a notice was issued to him to show cause why the penalty of reduction in the time scale by three stages for a period of two years affecting the future increments be not imposed upon him. Thereafter the Post Master General after taking into account the explanation submitted by the petitioner to the show cause notice ordered that the pay of the petitioner should be reduced in the lime scale by three stages for a period of two years and on restoration the period of reduction was not to operate to postpone his future increments. Thereupon the petitioner filed an appeal to the Director General, Posts and Telegraphs. The Director General directed further evidence to be taken on certain lines before deciding the appeal.

However, no further evidence was given on behalf of the Department and the matter was re-submitted to the Director General as it was Finally, the Director General considered thewhole matter on the merits and rejected the appeal.

The present petition is a sequetto the order of the Director General, and the petitioner contends that the punishment imposed upon him is violative of his fundamental rights under Arts. 19(1)(a) and 19 (I) (b) and should be quashed. Reliance is placed on his behalf on two cases of this Court in Kameshwar Prasad v. State of Bihar,(') and 0. K. Ghosh v. E. X. Joseph(').

Further it is contended that ss. 3, 4 and 5 of the Ordinance are ultra vires, as they contravene sub-clauses .(a) and (b) of Art. 19 (!). Lastly, it is urged that in any case there was no evidence on which it could be found that the charge against the petitioner had been proved.

Wamkoo, J.

Radhey Shyam

/3karma ... ' The Po!ttaaster Ge1ural Central Circle, N <, lgpUr

Wanchoo, J.

The petition has been opposed on behalf of the Union of India and it is urged that the Ordinance is perfectly constitutional and does not violate any fundamental rights. It is further urged that the two cases relied upon by the petitioner are of no assistance fo him, as they were concerned with R.4-A and Rule 4-B of the Central Civil Services (Conduct) Rules, l 955.

Lastly it is urged that there was evidence on which the autho . rities concerned could find the charge proved against the petitioner.

The first question that arises is whether ss. 3, 4 and 5 of the Ordinance are violative of any fundamental rights enshrined in the Constitution. The Ordinance as its name shows was passed in order that essential services may be maintained.

Its netessity had arisen because of a threat of strike inter alia by the employees of the Departmentt. Among 'Essential Service" as defined in s. 2 (I) is included the postal, telegraph or telephone service. Section 3 of the Ordinance provides that "if the Central Government is satisfied that in the public interest it is necessary or expedient so to do, it may, by general or special order, prohibit strikes in any essential service specified in the Order". Further upon the issue of such an order no person employed in any essential service to which the order relates shall go or remain on strike; and any strike declared or commenced, whether before or after the issue of the order. by persons employed in any such service, shall be illegal. Section 4 provides that any person who commences a strike which is illegal under the Ordinance or goes or remains on or otherwise takes part in, any such strike shall be punished with imprisonment. Section 5 provides that any person who instigates, or incites other persons to take part in, or otherwise acts in furtherance of, a strike which is illegal unlier the Ordinance shall be punishable with imprisonment.

The constitutionality of these sections is attacked on the ground that they violate.the fundamental rights guaranteed by els. (a) and (b) of Art. 19 (!). Under cl. (I) (a) all citizens have the fundamental right to freedom of speech and expression and under cl. (!) (bl to assemble peaceably and without arms. Reasonable restrictions on these fundamental rights can be placed under the conditions provided in els. (2) and (3) of Art. 19. We are of opinion that there is no force in the contentiton tli!at these provisions of the Ordinance violate the fundamental rights enshrined in sub-els. (a) and (b) of Art. 19(1). A perusal of Art. 19(1) shows that there is no fundamental right to strike. and all that the Ordinance provides is with respect to any illegal strike as provided in the Ordinance. This aspect has been elaborately discussed in the Bank Employees' case(') and it has been held that there is no fundamental right to strike

\ 407

1964 (see All India Bank Employees' Association v. National Industrial Tribunal(')). There is no provision in the Ordinanc which in any way restricts freedom of speech and expression, nor is there any provision therein which restricts any one from assembling peaceably and without arms. The Ordinance .thus has nothing to do with restricting the fundamental nghts enshrined in sub-els. (a) and (b) of Art. 19(1), and there 1s therefore no necessity of even considering whether the provisions of the Ordinance can be justified under els. (2) and

R.aMyShyam

•· The Po•lm.uler ··- General Central Circle, Nagpur

1 (3) of Art. 19. It is not disputed that Parliament had the com·

petence to make a law in the terms of the Ordinance and therefore the President had also the power to promulgate such an Ordinance. The competence of the legislature therefore being not in dispute we fail to see how the Ordinance can violate the fundamental rights guaranteed under sub-els . (a) and (b) of Art. 19(1) for there is no provision in it which in any way restricts those fundamental rights.

Learned counsel for the petitioner in this connection relies on two cases of thi.s Court to which reference has already been made. Kameshwar Prasad's case.(') related to R. 4'A of the Bihar Government Servants' Conduct Rules. 1956, which provided that no government servant shall participate in any demonstration or resort to any form of strike in connection with any ma.tter pertaining to his conditions of service. This Court held in that case that R.4-A insofar as it prohibited any form of demonstration, be it however innocent or however incapable of causing a breach of public tranquility was violative of Arts. 19(1) (a) and 19(1) (b) of the Constitution. This Court also held that insofar as that rule prohibited a strike it was good. since there was no fundamental right to resort to strike. In 0. K. Ghosh' s case(') this Court was concerned with r. 4-A and r. 4-B of the Central Civil Services (Conduct) Rules, 1955, and following the decision in Kameshwar Prasad's case('). 4-A was struck down in part so far as it related to demonstrations and r. 4-B was also held to be invalid. That case did not deal with the Ordinance at all and the charge in that case did not seem to have been in the same terms as the charge in the present case. No argument appears to have been urged either in the High Court or before this Court about the validity of the Ordinance or about the validity of the impugned order in rela(\on to the. Ordinance or the illegal character of the strike. In the circumstances that case is also of no assistance to the petitioner and there was n?thing decided .ere which would in any way' affect the validity of the prov1S1ons of the Ordinance. We are therefore of opmion that the Ordinance is valid.

Wan.c/Joo, J.

Radh•y Shyam

Sharme.

The Pwtmaster General Gentra~ Circle, Nagpur

Wanclwo, J.

We have already set out the charge framed against the petitioner. It will be seen that the charge is based entirely on the Ordinance and has no connection with rr. 4-A and 4-B which were considered in the Q.K. Glwsh's case('). The petitioner is charged with gross misconduct on the ground that on the midnight of July 11, 1960, he took part in a demonstration in furtherance of the strike of the employees of the Department in violation of the order of July 8, 1960. It is not disputed that on July 8, 1960, the Central Government had issued an order under s. 3 of the Ordinance prohibiting any strike in the Department. The strike therefore that started on the midnight of July 11, 1960 was an illegal strike in view of s. 3 (4)(b) of the Ordinance. Section 5 of the Ordinance provides inter a/ia that any person who acts in furtherance of a strike which is illegal is punishable thereunder.

The charge against the petitioner was that he had acted in furtherance of the strike which was to commence on the. midnight of July II, 1960 and was therefore guilty of gross misconduct. It is this charge of gross misconduct which has been found to be proved against the petitioner and which has led to the punishment inflicted on him. This charge as already indicated has nothing to do with r. 4-A and r. 4-B and therefore the two cases on which the petitioner relies have no relevance in connection with this charge. The punishment given to t.he petitioner cannot therefore be set aside on the ground that the. charge was in violation of the fundamental rights guaranteed under sub-els. (a) and (b) of Art. 19(1), which deal wit!). freedom of speech and expression and the right to assemble peaceably and without arms. The charge does not deal with these two matters at all. On the other hand it deals with acting in furtherance of the illegal strike which started on the midnight of July 11, 1960, and the petitioner was charged with gross misconduct inasmuch as he acted in furtherance of the illegal strike on July 11, 1960 after the strike had been prohibited by the Central Government by order dated July 8, 1962. Whether the "acting" in furtherance of the strike took the form of speeches or demonstrations would make no difference. In either case it can be said that there is a violation of Art. 19 (!) (a).

The only question that remains for consideration therefore is whether the petitioner's contention that there was no evidence at all on which the authorities concerned could find the petitioner guilty of the charge is correct. So far as that is concerned, the authorities had the following undisputed facts before them: -

(!) The petitioner "was the Secretary of the local union of the employees of the Department; .

(') [1963] Supp. 1 S.C.R. 789.

(2) On that day the petitioner's duty finished at ,8 p.m. and he should have normally gone home; but he stayed on in the dormitory till 11-30 p.m. which was just half an hour 'before the strike was to commence;

(3) The d.emonstration was held in connection with the strike by the employees of the Department at 11-30 p.m. just half an hour before the strike was to commence;

(4) The petitioner took part in that demonstration and was actually arrested amongst the demonstrators. If on these undisputed facts the authorities came to the conclusion that the petitioner acted in furtherance of the strike which was to commence half an hour later and was thus guilty of gross misconduct it cannot in our opinion be said that there was no evidence on which the authorities concerned could find the charge framed against the petitioner proved.

The contention therefore that there was no evidence on which the authorities concerned could find the charge proved must fail.

We therefore dismiss the petition. In the circumstances of this case we pass no order as to costs.

Petition dismissed.

RadlV'y ST.ya,.

The Postma8ter Gcnlral Central

Circle, N(;.gpur

Wanchoo, J.

K N. WANCHOO, J.

c. SHAH

ss. 3, 4 and 5

Constitution of India

Arts. 19(1)(a)

Jaipur

July 11, 1960

India

July 21, 1960

Radhey Shyam Sharma

11th July, 1960

Government of India

Arts. 19(l)(a)

ss. 3, 4 and 5

ss. 3, 4 and 5

Art. 19(l)(a)

Art. 19(1)

Radhey BAyam

Art. 19(l)(a)

[1962] 3 S.C.R. 269

Art. 19(l)(a)

Art. 32

Constitution of India

B. D. Sharma

S. V. Gupte

S. P. Varma

R. H. Dhebar

Wanchoo

WANCHOO

Art. 32

July 13,

July 18, 1960

July '21, 1960

Radhey Skyam

Radhey Sh yam Sharma

Central Services Nagpur

Arts. 19(1)(a) and 19

ss. 3, 4 and 5

Art. 19

Wamkoo

Radhey Shyam

ss. 3, 4 and 5

s. 2

Section 3

Central Government

Section 4

Section 5

Art. 19

Art. 19

Art. 19(1)

Art. 19(1)

Art. 19(1)

Art. 19

Parliament

Art. 19(1)

Kameshwar Prasad

Arts. 19(1)

. K. Ghosh

Wanclwo

Q.K. Glwsh

July 8, 1960

s. 3

s. 3

Section 5

July II, 1960

Art. 19(1)

July 8, 1962

Art. 19

RadlV'y