BHAWANI COITON MILLS LTD. v.

STATE OF PUNJAB & ANR.

April 10, 1967

[K. SUBBA RAO, C.J., J. C. SHAH, S. M. SIKRI, V. RAMASWAMI

AND C. A. VAIDIALINGAM, JJ.]

Pun; ah General Sales Tax Act (46 of 1948), ss. 2(ff), 5(1) second proviso and 5(2)(a) (vi) and Central Sale. Tax Act (74 of 1956), s.

IS(a)-Wltetlter provisions of State Act in conflict with those of Central Act. c Notification in 1958 under s. 5(1) prescribing rate of purchase tax- Amendment of word "purchase"-No fresh Notifictltfon-Lega/ity of levy of purchase tax.

The definition of the word "purchase" was first introduced in the Punjab General Sales !ax t, 194~, in, 1958. As .the rate of tax to b<> levied was to be contained m a Not1ficat1on to be issued under s. 5 (I) of the Act, a Notification was issued in Aptil 195S regarding the rate of tax on tbe purchase of goods "for use in the manufacture of goods. for sale", as per the tben definition of "purchase". The definition of

"purchase" was amended twice in 1959 and again by Punjab Act 18 of

1960. The definition after these amendments has reference to the good~ specified in Schedule C to the Act an item of which relates to cotton. and, after the 1960 amendment the clause "for use in the manufacture of oods for sale" was omitted. After those amendments, no fresh Notification prescribing the rate of tax on the purchase of goods was issued till September 26, 1961.

The appe, Jlant was a cotton ginning factory and was a dealer re¥is tered under the Act. Under s. 10, it had to send quarterly returns within the time specified and when sending the returns had to pay the amount of tax, in accordance with the returns which should also show the gross turnover. Failure to do so was an offence and subjected the dealer to heavy penalties. The appellant filed returns for the assessment years

1960-61, 1961-62 and 1962-63 and paid certain amounts of tax which, according to it were due from it. The assessing authority passed orders of assessment, including in the appellant's turnover the amounts representing the purchases of cotton made by the appellant for each of the yfla(s. The appellant thereupon filed writ petitions challenging the three assessment orders on the ground that the second proviso to s. 5 ( 1) and s. 5(2)(a) (vi) of the Act, enabling the State to collect purchase tax in respect of cotton, were opposed to s. 15(a) of the Central Sales Tax Act, 1956 and that, in consequence, it was not liable to pay any purchase tux for tbe. ~Slles,, ment years in respect of cotton. The High Court rejected the petrt11ons.

In appeal to this Court,

HELD: (1) (By Full Court) As no fresh Notification was issued tiU September 26, 1961, the orders of assessment for the two years 1960-61 H and 1961-62 could not be sustained. [592 H; 593 BJ

The levy of tax could not be sustaiiied under the Notification of 195S on the basts of s. ~2 of the Punjab General Clauses Act. That ection ha, no application, because the definition of "purchase" on the basis of L7Sup.Cl/67-7

578 Sl!Plll!Mll COllllT llllPO!lTS [t 967] 3 s.c.R

wblch that NotHlcatlon wu 111ued 11 lnconalltent with the dellnltlon of "purchue" 111 It atoocl a!tor lta nmll!ldment In 1%0. (5928-P]

Pu:lher, If tho levy la to be 1ull1lned on the bull et the Not!aaadon of 1958 the State coilld levy tax only on the cateaory of purobu• "tor UJO In iho manufacture of 1oods for 1111", But II wu not open to Ille State to make 8uch a cholee. (5!120)

(2) (Per Subba Rao, C.J., Shih and Voldlallnaam, JI.) f!ven though there w11 A notlllcatlon bin& the rate of tu tor Ille yw 1962-63, tho order of 111H1ment for that yur and alto for tho two yoal'I 1960-51 and 1961·62 1hould be ctUAlhld on tho ground thot tha 11rovl1lon1 of tho St1to law under whlcll they were made violated 1. 15 ot the Central Aot.

[591Al Under 1. 15(a) of thr Central Aet In mpoct of eommodltlu llko eotton which coma und1r tht ca"igory of "doclartd good~" ftl dt&ned In s, 2(c) of tho Ctntrlll .Ut, tilt purclim Ill OA11 be levied only at on• litAg1. '1111 1111nH of ono .. t1p tu111lon oon1l118 of llnllon of 11 1lnat1 f)Oint or 1tag1, olther by the Stolt Aot or th@ l'llll!i framl!ll th11r1u11dor. A

mero lnju111t111n by the Loll1l111ur1, ft! oontilnld In the Heond llO to "· s (I) llf Iii@ Sthill Alli, tllat the fAlll 1hould 1101 Ila hll!htr lhAll tho 000

find In the Central Aot, n11d thM tho levy mmt be nt one ~Inge 01 ml!IP t1011ed hi the Ceotul Aet, will b@ of 116 ttval!, UJ1lm the A@t or tho ruh111 framld under It make It otw tluH tl!eN wUI ht 1111 levy or e11tltetloo of 1 u, ootpt from the ptr1ti111 who MO b!lund lo pny 11!1 pl!F tht Cntrlll A@t, Tiit pl'll\lilo d11e1 116t 1etve ony mateFllll Plll'l!lllt beenu11 mn If ii did ntll @Xiii th@ aulhll!'lli@! CdllHlll le'.I}' tn on deellll1!d go0d1 II b mt~ higher thnn that laid d11wn lo the C1ntrn! A@I, l'8Ht1 5840"11!'

51!7PH1 SH l!urthor, thore e1n ho llCI ltg; tl llalJlllty ror paymtftt ol tlllt unl1111 lb• A@l 11r tll@ NIH pmorlll11 11 slnlll• "6int f61' 1111~11!011• but undof 1, S(2)(1i), In rt or !ht Hmt ltom Ill dtollrod 1, mol'll thin on• !lllf80ft 11 mndo tlnhl• to !II)' tax Md tho lllll 11 I od Al more thn ont •tap, Por OIM11!111 If Ii. 1ill1 doelM'ad l!(l0d1 to II and II to C CD ud C Mini rogl1tlrell llHlont) Alld tht Wllll Art btYond tilt w,.."; loij Cl! 6 monlh1 mtntlonud In 1. 5(2)(&) (vi), both A and B will be lliiiiii to PAY 1•11reha" \lllt. !598A-ll, 0.Jll ·

Moroover, In the final return Hnl by the dtlller, II will hAvo IO 1how

II In tho llll!nblo lurnovor nll purchw1 ot cotton etl'ooted b~_lt during the uceounllna yeu ond tho tn1 l!AYAblo will haw to bu pnld. Tho delller 01111

~Ill a doolnntlon from the cleller to whom the J~1 m rMOld and claim oxempdon undtr

1. 5(2lCa)(vl) !Ind r. 27A of th1 rul11 mid• und9r the Aot.

Dut th111 provll!Olll ttpp!y onlY. to r!gl81eled dellon, whurou 1. 15 of tho CentrAI Act 11 not mtrlctoil to reji!1rad dealm.

Allo If 11 non-rogl11tred denier lntorvon11, lllora 11 no mtohlnery by which tit; dealer can n!Certaln whtlhtr hit vendor of the d.clared 1ooc!• G lm pold the IH alrendy.

(58411; !8811..0, OJ The orden of ns11111ment oo'lld not be 1u1tnln1d on the bull of !hi J1rovl1lo111 tnr refund In 1. 12 nnd the rul11, Th080 provl1\on1 do not ufford ndoQURI~ relief. If the Centrnl Act mnkc1 It m1111dntory that th• !AX can be collected only at one 1taao It 11 not cnou; h !or th• State to •Dy thRI a pcr1on who 11 not liable to pay tnx, mutt neverthcl111 pay 11 In the fll'lt ln1tnncc nnd then claim refund At n later 11a.ao. U 1 penon 11 I• not liable for Jlaymant of tsx RI nil, at any time, the collectlon of 1 lilt from him with n !lO!!lblc contingency of refund nt n Inter ataae will not make Ille orlatnnl levy valid.

Bclde1, even In the matter of Obtain lni rotunda the appcllnnt will hnve to place before the oll\cer concemed,

particulars of transactions connected with the commodity and the basis on which it claims relief, and It would be extremely dilllcult to collect . the materials In this behalf, because, there is no provision in the Act or tbe rules on the basis Of which It will be entitled to be supplied with 1uch relevant materials. [S89C.OJ

Modi Mills v. C./.T., Pun/ab, [1965] 1 S.C.R. 592 and A. V, FerMn tlet v, The Stare of Kerala, [19S7) S.C.R. 837, followed,

(Per Sikrl and Rnmaswaml, JJ. dissenting) : The assessment for tbe year 1962·63 is valid, The second proviso to s. S serves one useful purpose, namely, it gives immunity to the State Act from challenge on the ground that it• provisions infringe s. IS of the Central Act. The Stllte Act is good and in effect complies with the requirements of s. 15 of the Central Act, because, it is possible to find out the stllge at which purchase tax become• lcviable on goods mentioned in Schedule C, both in cases where the purchasers are registered dealers and in cases where unregistered dealen in tcrvene. Under ss. 4 and S of the Act the stage Is the first purchase which Is not exempt from tuatlon or which Is no! deductible from the taxable turnover of a dealer under s. 5(2) of the State Act. For eumple, if A buys cotton and sells It to B and B sells to C, where all are register cd dealers, if A is liable to pay purchase tax, B and C could say to the

usessing authority that they are exempt from paying purchase tax. Since A would be Interested in obtaining the declaration from B for clalmlll!! exemption under s. 5(2)(a)(vi) and B would be lntetested in knowing whether A's was the first taxable purchase, they will behave like ordinary husinc•smen and know the true position as to whether A wa• liable or not. If A's sale was within and B's sale beyond, the period of 6 .months mentioned in s. 5(2) (a) (vi), B will be liable to pay purchase tax and the purchaser from him would be exempt. If in the illustration C is an unregistered dealer, B will be liable to pay purchase tax because he cannot claim exemption under s. 5(2) (a)(vi). If B is also an unregistered dealer, B would be liable and C would be exempt. If B is an unregistered dealer, and C is a registered dealer, B wlll be liable unless he obtains the prescribed declaration from C. But if there is double taxation due to mischance in the case of registered dealers or ignornnce in . the case of unre~•tered dealers, the Act cannot be treated as void for F that reason especially when there is a suitable provision for refund.

[S93C..CJ; S94A.C, E-01

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2386 2388 of 1966,

Appeals from the judgment and order dated November 23. 1965 of the Punjab High Court in Civil Writ Nos. 1591 of 1963 and 1913 and 1914 of 1962 respectively.

S. T. Desai, A. N. Sinha, C. D. Garg and B. P. Jira,. for the appellant (in C.A. No. 2386 of 1966).

H. L. S/1ibal, A. N. Sinha, C. D. Garg and B. P. Jha, for the appellant (in C. As. Nos. 2387 and 2388 of 1966).

Bishan N(JJ'ain, 0. P. Malhotra and R. N. Sachthey, for the

rpondents (in all the appeals).

The Judgment of SUBBA R.Ao, C.J., SHAH 1 and VAIDIALIN• GAM, JJ. was delivered by VAIDIALINGAM, J. St. J. on behalf of hims.elf and RAMASWAMI, J. delivered a partially dissenting Opinion.

Vaidialingam, J.

In all these three appeals, on certificate, the common judgment of the High Court of Punjab, dismissing the three writ petitions filed by the appellant, is under attack, by Mr. S. T. Desai, learned counsel for the appellant.

The appellant, who is the same in all these appeals, is. the Bhawani Cotton Mills Ltd., running a cotton ginning factory, and engaged in the business of manufactming yarn from cotton.

It is a dealer, registered under the Punjab General Sales Tax Act, 1948 (Punjab Act. No. XLVI of 1948), hereinafter called the Act.

The appellant filed returns for the assessment years 1960-61, 1961-62 and 1962-63. It had-paid a certain amount of tax which, according to it, was alone due from it.

But, according to the appellant, it was not liable to P!IY Central sales tax on the purchase of cotton during the relevant accounting years.

The appellant had taken various grounds of ttack, before the assessing authority, but the most important contention

rarsed, appears to have been that the material provisions iii the Act, particularly the second proviso to s. 5 (1) and cl. (vi) of s. 5(2)(a), of the Act, enabling the State to collect purchase tax, in respect of cotton, are opposed to the material provisions of the Central Sales Tax Act, 1956 (Act LXXIV of 1956) (hereinafter called the Central Act).

The appellant pleaded that it was not liable to pay, in consequence,_ any purchase tax, for the assessment years in question, in respect of cotton

The Excise & Taxation Officer, Ferozepore, did not accept the plea of the petitioner-appellant regarding its non-liability to pay the purchase tax on cotton. He, accordingly, passed orders of assessment, including the turnover representing the purchases of cotton made by the appellant. The l!Ssessment orders for the years 1960-61 and 1961-62. are dated November 15, 1962, and for the assessment year 1962-63, is dated July 30, 1963.

The appellant, thereupon, filed Civil Writ Petitions, Nos. 1913 and 1914 of 1962 and 1591 of 1963, challenging the assessment orders for the years 1961-62 and 1960-61, and 1962-63 respe<:tively.

The High Court, by its common order, rejected the writ petitions filed by the appellant and confinned the orders of assessment. passed by the assessing authority.

Tl1e common question, that arises for consideration, in these three appeals, is as to whether the second proviso to s. 5 (1) and

cl. (vi) ef s. 5{2)(a) of the Act, are opposed to any of the relevant provisions of the Central Act.

A further question arises

A in Civil Appeals Nos. 2387 and 2388 of 1966, regarding the validity of a Notification, issued by the State Government, under s. 5 of the Act, on September 26, 1961. We shall consider this further question, after expressing our opinion, on the more important question, which is common to all the appeals.

In order to appreciate the contentions that have been taken before us, by Mr. S. T. Desai, learned counsel for the. appellant, and Mr. Bishan Narain, learned counsel for the State, it 1s necessary to refer to the relevant provisions in both the Acts. It is only necessary to refer to the provisions of the Act, as they stood on April 1, 1960.

The Act of 1948, has been amended from time to time, and it may not be necessary t.o refer t~ those amendments, excepting on one aspect, when we deal with the

validit~ of the Notification, referred to earlier.

Coming to the Act, according to its preamble, it is an Act to provide for the levy of a general tax on the sale or purchase of goods in Punjab; The expressions "dealer", "goods", "prescribed"' "purchase"' "sale"' uturnover" and "year" are defined in els. (d), (e), (f), (ff), (h), (i) and (j) of s. 2. Particularly, s. 2(ff), defining- "purchase'', is as follows :-

"2.(ff) In this Act, unless there is anything repugnant in the subject or context,- 'purchase' with all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge." In Schedule C to the Act, the item with which we are concerned, relates to cotton, and it is as follows :-

"Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste." Therefore, the definition of the expre$sion "purchase", has reference to the goods specified in Schedule C.

The expression "turnover", in s. 2(i), will include the aggregate of the amounts of sales and purchases ad parts _of sales . and purchases actually made y any dealer, durmg the given penod. No doubt, certain deductmns are also. mentioned in the definition of that expression.

In thes~ appeals, smce we are concerned only with tax on purchases, 1t is not necessary for us to advert to the definition of '.'sale", in s. 2(h), except to note that it excludes goods specified m Schedule C.

Section 4 deals with the incidence of taxation, a dealer, whose gross turnover, during the year, and it makes in question,

exceeded the taxable quantum, being liable to pay tax on all sales and purchases, subject to the provisions of ss. S and 6. In fact, the purchases, for jleing made liable, should have been e.tcd after tho cOlllllWncement of the Amendment Act of 1958, amending the original Act.

Section 4(2A) provides that no tax on. the sale of any goods shall be levied, if a tax on their purchase is parable under the Act, and this is notwithstanding an)'lhing contained in sub-ss. ( 1) and (2) of s. 4. The effict Of this provision is that if a tax on purchase is payable, then, in respect of the same goods, no tax shall be levied on their sale. Sub-s. ( 5) of s. 4 defines the expression "taxable quantum''. Section S deals with the rate of tax and it provides for )evying a tax, on the tax, able tumovet of a dealer, at rates not exceeding six naye paise in a rupee, as the State Government may, by notification, dueci, and the levy must be subject to the provisions of the Act. e second proviso to s. S ( 1) is, as follows :-

"Provided further that the rate of tax shall not ex ceed two naye paise in a rupee in respect of any dee Jared goods as defined in clause ( c) of section 2 of the Central Sales Tax Act, 1956, and such tax shall not be levied 011 th!' urchase or sale of such AOOds at more than one stage. '

The expression "taxable turnover" is defined in S• s (2) I but, in arriving at the taxable turnover, the various deductions, men tioned in the sub-clauses of s. 5(2)(a) and s. S{2)(b), are exempt.

Sub-cl, (vi), of s. S ( 2) (a), which mentiom OJIC of the items which is deductible in arriving at the taxable turnover is. as follows :-

" .... turnover during that period on the purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in, the course of inter-State trade or commerce, or in the course of export out of the territory of India : Provided that in the case of such a sale to a regis tered dealer, . a declaration, in the prescribed form and duly filled and signed by the registered dealer to w)!om the goods are sold, is furnished by the dealer claiming deduction." Section 7 deals with the registration of dealers.

Section 10 relates to payment of tax and the filing of returns. Its sub-s. ( 1) provides that the tax payable, under the Act, shall be paid in the manner provided, at such intervals as may be prescri])ed.

It may be mentioned here that there is no dispute that the appellant is one of those types of dealers who has to send quarterly returns, within the time specified. Sub-s. ( 4) of s. 10 makes it

obligatory on the registered dealer tq pay the full amount of tax due from him, under the Act, according to his returns, before the returns are furnished, and it provides for the returns being accompanied by the Treasury or Bank receipts evidencing such payment. It is only necessary to note that the appellant, when sending its quarterly returns, during the middle of a year, has to pay the amount of tax, in accordance with that return, and that return should also show the gross turnover, in accordance with the Act. Sub-s. (6) of s. 10 makes a dealer liable for penalty, in the circumstances mentioned therein.

Section 11 of the Act deals with assessment of tax. Section 12 deals with refunds and, in the circumstances mentioned therein, a registered dealer can claim refunds from and out of the amounts which he has already paid.

Section 23 provides for offences and penalties; and, particularly, cl. (b) of s. 23 (1) makes failure, without sufficient cause, to submit a return, as required by s.10(3), an offence.

Section 27 enables the State Government to make rules under the Act.

Rules have been framed, by the State Government, and it is only necessary to refer to some of the rules. Rule 20 makes it obligatory on the dealers concerned, other than those referred to in rr. 17, 18 and 19, to furnish returns,_ quarterly, within thirty days from the expiry of each quarter. We have already referred to the fact that the appellant is liable to send quarterly returns.

Rule 27-A is as follows :-

"A dealer who wishes to deduct from his gross turnover the amount in respect of a purchase on the ground that he is entitled to make such deduction under sub-clause (vi) of clause (a) of sub-section (2) of section 5 of the Act, shall append to his return in form STVIDA, a list in form STXXVlIB or form STXXVIIC as the case may be, and produce on demand by the Assessing Authority a declaration in writing in form. . . . . . . . by the dealer to whom such goods are sold or by his agent."

Rules 48 to 55 deal with the procedure to be adopted for obtaining a refund of tax paid, under s. 12 of the Act.

Co!Iling to the Centrl Act, oe of the P, UqJOscs sought to be achieved by that Act 1s to specify the restncuons and conditions to. which State .laws, imposing taxes on the sale or purchase of certam g?<Jds, which are declared to be of special importance, sh8Jl be sub1ect. The expressions "dealer" and "declared goods" are defined in ss. 2(b) and 2(c), respectively. "Declared goods"

~1eans goods declared, under s.14, to be of special importance in

mter-State' trade or commerce.

Section 14 enumerates the

various good~ which are declared to be of special importance in A inter-State trade or commerce.

One of the items, so declar!d, is "cotton", under item (ii), which is described as follows :-

"cotton, that is to say, all kinds of cotton ( indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste." B Section 15, imposing restrictions and conditions in regard to tax on sale or purchase of declared goods, within a State 'is as follows :-

"15. Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a , tax on c the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :-

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent of the sal~ or purchase price thereof, and such tax shall not be levied at more D than one stage;

(b) where a tax has been levied under that Jaw in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject E to such conditions a• may be provided in any law in force in that State." Pausing here for a minute, it may be stated that the attack, regarding the validity of some of the provisions of the Act, by the appellant, is rested on s.15 (a) of the Central Act, on the ground that such a levy of purchase tax, regarding cotton is F neither definite nor ascertainable in the Act and that, as 'the provisions now stand, there is a possibility of the tax being levied at more _than one stage. According to the appellant, the State legislation, which deals with the imposition of tax in respect of a sale or purchase of declared goods, must conform to the provisions of s.15(a) of the Central Act. The ingredients of those G provisions are : (i) In respect of "declared goods", a tax, either on sale or purchase, alone, can be levied; and it _cannot be on both sale and purchase.

(ii) The rate of tax should not exceed the maximum limit fixed bv the Central Act, and (iii) The tax can be levied only at one "stage. The essence of a one-stage taxation consists of fixation of a single point or stage, either by H the State Act or the rules framed thereunder. In this case, according to the appellant, it has to send quarterly returns, even during the accounting year and, as per s. 10(4) .of the Act, it

BHAWANI COTTON MILLS v. PUNJAB (Vaidia/ingam, !.) 585

has to pay also tax, in accordance with the returns submitted by it for every quarter. In the returns that are being sent, the dealer will have to include all purchases' of cotton, effected by him during the quarter for which the return is sent.

There is no indication, either in the Act or in the rules or the forms prescribed, as to whether the persons, from whom the appllant purchased cotton, have paid tax or _!lot. tion 15 of the Central Act is not restricted only to registered dealers. 'fltre will also be nothing to guide the appellant to know as to whether the goods, purc:hased by it, have been sold to it by its vendor within the period mentioned in cl. (vi) of s. 5 (2)(a) of the Act.

Under thase circumstances, there is always a possibility, or even a certainty, of more persons than one having paid tax or being made liabll~ to pay tax in respect of the same goods at diffrent stages.

That is quite opposed to the provisions of s.15(a) of the Central Act.

Even otherwise, it is pointed out that if a person has purchased cotton and sells it after the period provided for in s. 5 ( 2 )(a) (vi) , that party is liable to pay sales tax and would hav1~ also paid the same.

Another purchaser from the said party will alo be liable to pay tax, Q.n.the same commodity, if he. sells the goods, after the period mentioned in cl. (yi). '.fhat is, two persons are made liable for payment of tax, in respect of the same commodity. In other works, the purchases of the same item of dec:lared goods, by the persons indicated above, are made liable for tax, whereas under the Central Act, there can be only one levy and collection of tax at one stage, either on sale or on purchase.

Furthe1~ it is argued that the second proviso to s. 5 ( 1) of the A1:t, is conirary to s.15(a) of the Central Act, inasmuch as the main section, which levies the rate of tax viz., s. (1 ). as well as the Notification issued under it, clearly show that the Act levies tax at a far higher rate than the maximum provided under s. 15 (a) of the Central Act. Under these circumstances, it is pointed out, that both the second proviso to s. 5 (1), and cl. (vi) of s. 5 (2 )(a). of the Act, will have to be struck down.

Counsel has also drawn our attention, to the relevant provisions in the Sales-tax Acts in force In the States of Madras Mysore, Andhra Pradesh and Uttar Pradesh,· where the stage. ai which the .. tax is to be levied either on purchase or on sale, has n definitely and clearly indicated. Such a provision, it is pointed out, has not been made in the Act.

On behalf of the State, it is urged that the provisions of the Act are quite consistent withs. 15(a) of the Central Act. Counl points out that the second proviso to s. 5( 1) of the Act, makes 1t very clear that the. rate of tax, in respect of declared goods, shall not exceed the rate mentioned in s.15(a) of the Central

586 SUPREME COUR'f REPORTS

[1967] 3.S.C.R.

Act, either on purchase or on sale. Counsel afso points out that the said proviso further reiterates that the levy of tax, either on purchase or on sale, shall not be at more than one stage.

eounsel further developed his argument by staung that the normal rule, under the Act, in respect of declaed goods, is to levy thti tax, on sale or purchase, at the very first sta'ge, that is, when the first sale or first purchase talces place. Therefore, the stage is definitely fixed, but the Act itself gives, as will be seen by sub-s. (2) of s. 5, various types of transactions which are to be excluded, in arriving at the dealer's taxable turnover.

It is open to a dealer to claim exemption, in respect of any particular transaction, under one or other of the various clauses in s. S (2).

When that is so, the stage at which the tax is levied, gets changed, and the liability passes to the next dealer, urtless he himself is able to claim any exemption. But, ultimately, it is only one transaction, of sale or purchase, that is made Ua!)le to tax.

Counsel also points out that the first proviso to s. S ( 1 ) , of the Act, which is quite in conformity with s.15(a) of the Central Act, is perfectly valid.

It Is pointed out that in relipect of persons clauning exemption, under cl. (vi) of s. 5 ( 2 )(a), the procedure to be adopted is indicated in r. 27 A, of such a purchaser getting a declaration, in the form mentioned therein, from the dealer, to whom such goods are sold, or by his agent. Therefore, under those circumstances, if once a dealer gives a peclaration

to his vendor, the former will clearly know that the latter is exempt from taxation, and the liability to pay tax is his, unless he is able to pass it on to others. There is no uncertainty, in the matter of fixing the stage, regarding the levy of sale or purchase tax.

Therefore, that provision also is not violative of the Central Act.

Counsel also urges that in case a party is eligible for refund, on the ground that he is not liable to pay, in pect of any particular purchase, ample provision is made for obtaining refund, under s.12 of the Act.

Therefore, under those circumstances, the State presses for the decision of the Punjab High Court, being upheld.

We are not 'impressed with the contentions of the learned counsel for the State. A perusal of the judgment, under attack, shows that the learned Judges themselves were very much impressed by the various aspects presented before them, on behalf of the appellant. In fact, the learned Judges observe that the various difficulties, pointed out 1Jr the petitioner before them, did exist in the actual working of the Act, but the view of the High Court was that s.12 of the Act provided for obtaining a refund and, therefore, though the petitioner might have to deposit. initially, the tax in respect of th~ purchases, whn the quarterly returns were being, submitted it \vas open to it to obtain refunds. at the appropriate stage.

BHAWAN! COTTON MILLS v. PUNJAB (Vaidialingam. /.) 587

The provisions of the statutes, in .<luestion, have been referred to by us earlier.

Section 15(a), of the Central Act, makes it mandatory that the tax shall not be levied at more than one stage. In this case, the State does not levy any tax:, both on the sale and purchase, of the same declared goods. The second proviso to s. 5 ( 1) is, no doubt, substantially in accordance with the provisions of s. 15 (a), of the Central Act. That proviso was, absolutely necessary, because, without it, it would have been prima facie open to the State to levy tax: under s. 5, at a higher rate than that indicated in the Central Act, in wliich case it would certainly have peen illegal.

The mere existence of the second proViso, to s. 5 ( 1) of the Act, does not materially advance the case of the State.

That same proviso, came up for consideration, before this Court, in Modi Mills v. C.I.T., Punjab('). In dealing with the proviso, Hidayatul!ah, J., speaking for the Court, observed, at p. 600 :

"The meaning or the intention of cl. ( 3) of Art. 286 is not to destroy all charging sections in the Sales Tax Acts of the States which are .discrepant with s.15

la) of the Central Sales Tax Act, but to modify them in accordance therewith. The law of the State is declared to be subject to the restrictions and conditions contained in the law made by Parliament and the rate in the State Act would pro tanto stand modified. The effect of Art. 286(3) is now brought out by the second proviso to s. 5 ( 1 ) . But this proviso is enacted out of abundant caution and even without it the result was the san1c."

From the observations, noted above, it will be clearly seen that the proviso, in question, does not serve any material purpose, because, even if that proviso did not exist, in the State Act, the authorities cannot levy tax, on declared goods, at a rate higher than that laid down in the Central Act. Therefore, the mere in- 3unclion, by the Legislature, as contain!:d in th(' si; cond proviso to s. 5 (1 ) , that the rate should not be higher tha1' the one fixed in he Cen.tral A; ct, and that the lev~ must be at one tage, as agam menuoned m the Central Act, will be of no avail unless the

At, or the rules framed. under it, make it very clear' that there will be no levy or collecuon of tax, except from the persons who are bound to pay, as per the Central Act. It is here that there is considerable difficulty caused by the absence of any provision, either in the Act or in the rules or the forms, indicating 'the stage at which the tax is to be levied. In the case of commodities,

(1) [I965J t s.c.R. 592.

like cotton, which come under the category of "decled goods .. ,

tax can be levied only at a single point, as is made clear by s.15

(a) of the Central Act, and, in our opinion, there can be no legal liability for payment of tax accruing, until and unless the Act, or the rules framed thereunder, prescribe a single point for taxation. For the matter of that, even in the final return to be sent by a dealer, under the Act, the dealer will have to show, in the taxable turnover, all purchases of cotton effected by him during the accounting year.

We have already referred to the fact that, along with the returns, the tax payable on the basis cif those returns, will have to be paid. At that stage, thti question naturnlly arises, as to whether there is anywhere in the Act or 1he rules any provision, by which the person, sending the return, will be able to know that the tax, in respect of the declared goods purchased by him, has already been paid by another dealer and that the value of the purchases, effected by him, need not be shown in his return. He cannot take, an off-Jiand chance, in this matter, because there are very heavy penalties imposed on a dealer, for failure to include, in the returns sent by him. any transactions in respect of which he is liable to pay tax. If that is the position at the end of a year, when the fin~! return is sent, the position becomes still worse when the quarterly returns, accompanied by payment of taxes, are to be sent during the couise of the accounting year itself.

Counsel, for the respondent, has pointed out that, if a dealer -wants to claim exemption, under sub-cl. (vi) of s, 5(2)(a), r. 27 A provides for his getting a declaration from the dealer, to -whom the goods are re-sold, in which case, the dealer is absohed

from the liability to pay tax. We hiwe gone through the various statements contained in the said Rule, as well as the Forms, to which it refers, but they are not decisive, either way. There will also be cases where a non-registered dealer may have intervened and, even if such dealers intervene, it is clear that under s. 15(a) of the Central Act, the tax cannot be levied at more than one stage. There is no machinery by which a dealer can ascertain whether his vendor, of the declared goods, has paid the tax already. Even otherwise, it will be seen, that if a dealer, A, sells the declared goods, to B, six months after the close of the year (B being a registered dealer), A becomes lia6le to purchase tax.

But, if B sells the identical declared goods, again, after the period mentioned in sub-cl. (vi), he will also be liable to pay purchase tax. That means, in 1espect of the same item of dcc!nred goods. more than one person is made liable to pay tax and the tax is

also levied at more . than one stage.

That is not permissible, under s. 15(a) of the Central Act. If goods are resold to a non- Tegistered dealer, within the period, sub-cl. (vi), will not help the original purchaser.

We may also point out, nt this stage,

that sub-cl. (vi), of s. 5(2)(a), negatives the assumption that the . normal rule, under the Act, in respect of declared goods, is to levy the tax on the first purchaser.

Mr. Bishan Narain, counsel for the State, faced with these difficulties, no doubt referred us to the provisions contained in s. 12 of the Act, relating to refunds.

Counsel pointed out that the manner in which a purchaser can claim refunds, is also elaborately indicated in rr. 48 to 55 of the Rules. If persons, like the appellants, satisfied the authorities concerned that they had paid amounts, by way of tax, which they were not .legally bound to pay, it was open to th~ to ask for refunds of such excess "mounts paid.

Therefore, even assuming that, in the first instance, the appellant has paid the purchase tax and, later on, it is found that it is not liable for the same, s. 12 of the Act would afford adequate relief. We are not impressed with this argument.

The position is not so simple. Even in the matter of obtaining refunds, there can be no controversy, that the appellant will have to place, before the officer concerned, particulars of transactions connectr.d with the commodity, in question and also the basis on which it claims the relief. It will be absolutely difficult, if not impo; sible, for persons °like the appellant, tQ collect materials in this behalf, because, there is no provision, contained either in the .Act or the rules, on the basis of which it will be entitled to be 'upplied with all the material Information, relevant, for sustaining a request for refund. If the Central Act makes it mandatory that the tax can be collected only at one stage, in our opinion, it is not enough for the State to say that a person, who is not liable to pay tax, must, nevertheless, pay it in the first instance, and then claim refund, at a later stage. We may state that the question as to how far a party can ask for refund, without the order of assessment being set aside, by ae£ropriate proceedings, is highly doubtful; because, at the time when the actual order of assessment is passed, in certain cases, it may not be possible for a party to say whether he is entitled to exemption, or not, under sub-cl. (vi) of s. 5(2l(a) of the Act. If a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with a possible contingency of refund at a later stage, will not make the original levy valid; because, if particular sales or purchase are exempt from taxation altogether, they can never be takc:n into account, at any stage, for the purpose of caTculating or arriving at the taxable turnover and for levying tax.

In this connection, we may refer to the observations of this Court, in A. V. Fernandez v. The State of Kerala('). This Court, after referring to the observations made earlier in Messrs. Chatturam Hori/ram Ltd. v. Commissioner of Income-tax, Bi/Jar &

(I) [19l7] S.C.R. 837.

Orissa('), regarding the three stages in the imposition of tax, being the declaration of liability, assessment, and recovery, said, at p. 852:

"If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions . in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either.

Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to py must be ascertained without any reference whatever to the same.

There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the 'provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted frQID taxation altogether. The Legislature cannot enact a Jaw imposing or authorising the imposition of a tax thereupon as they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them. and thev do not come within the purview of the Act at all.

Tbe very fact of their no11liabi!ity to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turn over on which sales tax can be levied or imposed." The above observations clearly lay down that the provisit; ins con

tained in a statute, with respect to exemptions of tax or refund or rebate, on the one hand, must be distinguished from the total non-liability or non-imposition of tax, on the other. These observations; also, in our opinion, effectively provide an answer to the stand taken by the State, in this case that s. 12 of the Act provides an adequate relief, by way of refund, even if tax is <:ollected at an earlier stage.

Having due regard to the various matters mentioned above, we aie satisfied that the decision of the High Court, upholding

(I) (195512 S.C.R. 290, 297.

the or<jers of assessment passed by the Officer, in question, cannot be sustained.

We have already indicated that there is one other point, aris ing for decision, in Civil Appeals Nos. 2387 and 2388 of 1966.

That relates to the validity of the Notification, issued by the State Government, under s, 5 of the Act, on ptember 26, 1961. The assessment periods, covered by these lwo appeals, relate to 1960-61 and 1961-62.

At the material time, the definition of the expression "purchase," as contained in s. 2(ff), has been already referred to by us. The definition of the word "purchase" was first introduced in the Act, by Punjab Act VII of 1958.

According to that definition, it was as follows :-

" 'Purchase', with all its grammatical or cognate expressions, means the acquisition of goods other than sugarcane, foodgrains, and pulses for use in the manufacture of goods for sale, for cash or deferred pyment or other valuable consideration, otherwise than under a mortgage, hypothecation, charge or pledge."

By Punjab Act XIII of J 959, the words "other than sugarcane, foodgrains and pulses", were omitted.

Then there was a further amendment, by Punjab Act XXlV of 1959 and, after the said amendment; cl. (ff) stood as follows :-

" 'Purchase', with al! its grammatical or cognate E expressions, means the acquisition of goods pecilied in Schedule C for usei in the manufacture of$ooJs for sale, for cash or deferred payment or other valuable consideration, otherwise lhan under a mortgage, hypothecation, charge or pledge."

F This definition was again amended by Punjab Act XVIII of 1960.

The rate of tax, provided by the Act, was 4 % and, we have already indicated that the Central Act was enacted in 1956; and we have also adverted to the material provisions therein.

We have adverted to the fact that, under s. 5 of the Act, the rate of tltx that is to be levied, is to be contained in the notification that is to be issued under s. 5 (1). Accordingly, on April 19. 1958, the State Government issued, under s. 5 ( 1), as amended' by the Punjab Act "'.ll o~ 1958, a Notification regarding the rate of tax. In that No11ficat1on, the rate of tax on the purchase of goods, by a dealer, for use in tlie manufacture of goods for sale. was fixed at 2 naye paise in the rupee.

Section 2 (ff) was, later on amended in 1960, by Punjab Act XVIII of 1960, and the definition. of "purchase", as contained in this provision, has already been referred to by us.

The State Government issued a Notification under s. 5 (1) of the Act, on 8eptember 26, 1961.

Under this Notification, it was . provid.ed that the rate of. tax on A the purchase of goods specified in Schedule C, appended to the Act, would be 2 naye paise in the rupee.

The contention that was taken by the appellant was that, notwithstanding the fact that the definition of the expression "purchase", was changed with effect from April 1, 1960, the B Notification fixing the rate of tax, under that amended definition was not issued until September 26, 1961, and it was furthe; urged that, in consequence, no assessment could be made of any tax on declared goods, mentioned in Schedule C, prior to Sei>: tember 26, 1961.

It was not disputed by the State that no fresh notificauon C was issued, after the expression "purchase" was amended in 1960, till September 26, 1961. But the State attempted to sustain the levy on the ground., that the original notification, of April 19,

1958. would be valid even after the amended definition ins. 2(1i), as it now stands.

It is open to the State to tax all purchases which come within the definition of s. 2(1i) as it.now stands, but D the S111te, it is p_ointed out, must be considered to have chosen .to levy tax only 1f the purchases have been made for use in the manufacture of gobds for sale.. Alternatively, it was also pointed out that the notification, issued in 1958, must be considered to

hav~ validity, even after the amendment, by virtue of s. 22 of the Punjab General Clauses Act. We are not impressed by these con E tentions, advanced on behalf of the state.

Section 22 of the Punjab General Clauses Act has no applica tion, whatsoever, to these cases. . Apart from the fact that there is no question of the 1958 Act being repealed or re-enacted, it is also clear that the definition of the expression, under s. 2(1i), as it stood in 1958, on the basis of which the notifiC'.ltion of 195S F was issued, is quite inconsistent with the amended definition of the expression "purchase", ins. 2(1i), in 1960. The High Court has sustained the levy of tax under the original notification of 1958, on the basis of s. 22 of the Punjab General Clauses Act, which, in our opinion, does ilot assist the State. It is not open to .the State to urge that it is entitled, in the matter of levying tax, G on transactions by way of purchase, to tax only the category of purchases for use in the manufacture of gobds for sale. Further, the State has not been able IQ satisfy us that there is any reason able classification made, which will enable this Court ti> sustain the Notification.· Inasmuch as no fresh notification had been issued, under s. 5(1), till September 26, 1961, the assessment for H the years 1960-61 and 1961'62, on the basis of the Notification issued iii. 1958, cannot be sustained, on this additional ground

also.

BHAWANI COTTON MILLS V. PUNJAB (Sikri, /,) 593

We therefore allow the appeals, in the manner indicated above.

The State will pay costs to the appellant in Civil Appeal No. 2386 of 1966.

Sikri, J, I have read the judgment prepared by my brother, V aidialingam, J. I agree with him that assessments for the years 1960-61 and 1961-62 on the basis of notification issued cannot be sustained and Civil Apeals Nos. 2387 and 2388 of 1961i have to be allowed .. But, with respect,· I regret I cannot agree with him that the assessments in question have to be quashed On the ground that they violate s. 15 of the Central Sales Tax Act My brother has set out the relevant statutory provisions and it is not necessary to extract them here. In my opinion the Punjab Act does in effect comply with the requirements of s. 15 of the Central Sales Tax Act because it is possible to find out the stage at which purchase tax becomes Jeviable on goods mentioned in Schedule C. This stage is the first purchase by a dealer, which is not exempted from taxation or which is not deductible from the taxable turnover of a dealer under s. 5(2) of the Punjab Act. In my view, this follows from ss. 4 and 5 of the Punjab Act. Subject to the provisions of ss. 5 and 6, s. 4 makes a dealer liable in respect of all purchases, first purchases, second purchases and last purchases, but the second proviso to s. 5 provides, in effect, that the purchase tax shall not be levied at more than one stage.. Which stage does the proviso cut out? It seems to me that every purchase except the first purchase has been eliminated. Take the following illustration: Dealer A buys cotton, A sells it to dealer B, and B sells it to dealer C. If dealer A is liable to pay purchase tax under s. 4, by virtue of the proviso no other dealer is liable, because otherwise this would amount to imposing tax at more than one stage. Could not dealer B or C say to the assessing authority that it is A who is liable, and if he is liable, the proviso exempts them from paying purchase tax ? But it is said that B and C may not know that A. is liable.

While buying goods, B has only to enquire from A whether his is the first taxable purchase. Indeed A, in order to claim exemption under s. 5(2) (a) (vi) will ask B to give him a declaration form.

Therefore, both A and B will know the true position, and A will claim the exemption and B will pay purchase tax unless he sells to another dealer. If B sells to another dealer D after the expiry of six months after the close of.the year, the period mentioned in s. 5(2)(a)(vi), B wm be liable to purchase tax. B may not ask D for the prescnbed d.eclaration form for it may be useless for him, but D will find out whether he is buying goods liable to purchase tax or not. B will tell D that he has not to pay purchase tax and will perhaps include purchase tax in the price. It .seems to me that if dealers behave like businessmen, which they wiU ordinarily do, there will be no difficulty in working the. provisions L7Sup.CI/67-8

of the Punjab Act. But if by mischance there is double taxation the State can only make a suitable provision for refunds.

In my view, the Punjab Act is in consonance with s. 15 of the Central Act, and if there is a possibility of taxation at more than one stage, the Punjab Act cannot for this reason be treated as void.

My brother does not say that the Punjab Act is void but in effect he implies it.

Let me now deal with the case when an unregistered dealer intervenes.

In the illustration I have given above let us deem C to be an unregistered dealer. A sells to B, and B sells to C.

B will be liable to pay purchase tax because he cannot claim exemption under s. 5(2)(a)(vi). Suppose B in the above illustration is an unregistered dealer.

Here B is liable to purchase tax unless he sells to C, a registered dealer and obtains the prescribed declaration. If C is an unregistered dealer, then B would be liable and not C.

If an unregistered dealer wants to escape taxation and his transactions are not known to the Sales Tax authorities till he is assessed under s. 11 ( 6) of the Punjab Act, the only way of complying with the second proviso to s. 5 and s. 15 of the Central Act is to give refund to a dealer who has been taxed in the meantime. The same thing would happen as far as I can see, under the State Acts which fix in terms a specific stage.

I may here mention that according to me the second proviso to s. 5 serves one useful purpose. It makes the Punjab Act . immune from challenge on the ground that its provisions infringe s .. 15 of the Central Act. The Punjab Act being good, it is only the assessments that can be challenged on the ground that they violate the second proviso to s. 5 of the Punjab Act. This aspect was not apparently brought to the notice of this Court in Modi Mil/s v. C.l.T. Punjab(1).

 Accordingly I would dismiss Civil Appeal No. 2386 of 1966 with costs, and allow Civil Appeals Nos. 2387 of 1966 and 2388 <>f 1966, wi'.h costs.

ORDER

In accordance with the ()pinion of the majority the appeals are allowed in the manner indicated in the judgment. 'l'he State will pay costs to the appellant in Civil Appeal No. 2386 of 1966.

V.P.S. -------

(!) 1.19651 S.C.R. 592.

BHAWANI COITON MILLS LTD

STATE OF PUNJAB & ANR

K. SUBBA RAO, C.J.

C. SHAH

S. M. SIKRI

V. RAMASWAMI

General Sales Tax Act

ss. 2(ff), 5(1)

s. 5(1)

s. 5

Schedule C to the Act

September 26, 1961

s. 10

s. 5

s. 5(2)(a)

s. 15(a)

Central Sales Tax Act, 1956

General Clauses Act

Subba Rao

Shih

Voldlallnaam

[1965] 1 S.C.R. 592

Sikrl

Rnmaswaml

IS of the Central Act

s. 15

Schedule C

ss. 4

s. 5(2)

s. 5(2)(a)(vi)

s. 5(2)

s. 5(2)

S. T. Desai

A. N. Sinha

B. P. Jira

A. N. Sinha

C. D. Garg

B. P. Jha

Bishan N(JJ'ain

0. P. Malhotra

R. N. Sachthey

SUBBA R.Ao

VAIDIALIN• GAM

VAIDIALINGAM

RAMASWAMI

Vaidialingam

High Court of Punjab

S. T. Desai

Bhawani Cotton Mills Ltd.

Punjab General Sales Tax Act, 1948

s. 5

s. 5(2)(a)

Central Sales Tax Act, 1956

s. 5

s. 5

s. 5

Bishan Narain

Punjab

s. 2

s. 2(ff)

Schedule C

Schedule C

Schedule C

s. 2(i)

s. 2(h)

Schedule C

Section 4

OlllllWncement of the Amendment Act

Section 4(2A)

s. 4

s. 4

section 2

Central Sales Tax Act, 1956

s. 5(2)(a)

India

Section 7

Section 10

s. 10

s. 10

Section 11

Section 12

Section 23

s. 23

Section 27

section 5

s. 12

Iling to the Centrl Act

ss. 2(b) and 2(c)

Section 14

Section 15

s. 10(4)

s. 5

s. 5

s. 5

s. 15

s. 5

s. 5

Madras Mysore

Andhra Pradesh

Uttar Pradesh

s. 5( 1)

s. 5

s. 5

Punjab High Court

Section 15(a)

s. 5

s. 15

s. 5

s. 5

Hidayatul!ah

Art. 286

Central Sales Tax Act

Parliament

Art. 286(3)

s. 5

s. 5

s. 15(a)

s. 15(a)

s. 5(2)(a)

Bishan

s. 12

s. 12

s. 5(2l(a)

s. 12

s. 2(ff)

Punjab Act VII of 1958

Schedule C

Punjab Act XVIII of 1960

s. 5

s. 5

April 19. 1958

s. 5

Section 2

Punjab Act XVIII of 1960

s. 5

8eptember 26, 1961

Schedule C

April 1, 1960

tember 26, 1961

Schedule C

April 19,

1958

s. 2(1i)

s. 22

General Clauses Act

Section 22

General Clauses Act

s. 2(1i)

s. 22

General Clauses Act

s. 5(1)

Sikri

V aidialingam

s. 15

Central Sales Tax Act

s. 15

Central Sales Tax Act

Schedule C

s. 5(2)

ss. 4 and 5

ss. 5 and 6

s. 4

s. 5

s. 4

s. 5(2)

s. 5(2)(a)(vi)

s. 15

s. 5(2)(a)(vi)

s. 11

s. 5

s. 15

s. 5

s. 5


AHMEDABAD MANUFACTURING & CALICO PRINTING

CO., LTD., AHMEDABAD AND ORS.

STATE OF GUJARAT & ORS.

April IO, 1967

[K. SUBBA RAo, C.J., M. HIDAYATULLAH, R. S. BACHAWAT,

J.M. SHELAT AND C. A. VAIDIALINGAM, JJ,)

Constitution of India, 1950, Art, 14, and Gu/arlll Education Cus Act, 1962-City of Ahmedabad divl.Jlble Into three zones-Different mdtlwd of levying cess In each zone-Whether results In discrimination.

Gujarat Education Cess Act, 1962, s. 12.--Levy based on assusment book prepared by municipality under Bombay Provincial Corporation Act, 1949 as applied to city of Ahmedabad-Sald assessment book; levying property tax at flat rate on basis. of floor area, declared Invalid by S11oreme Court-Section 12 of Cess Act whether survives-Cess Act whether invalid for lack of opp<1rtunlty to raise objections etc,

The petitioners had their textile mills in the City of Ahmedabad. The properties in Ahmedabad were. in three zones. In the Inner zone were situated proeerties which did not bear land revenue on account of the exemption given in s. 123 of the Bombay Land Revenue Code. In the middle zone were sitilated laods which though originally agricultural laods had been diverted to non-agricultural use. Io the outer z.one were lands which were purely agricultural.

Under the Gujarat Education Cess Ad, 1962 the Cess was of three separate kinds; (a) a surcharge on land revenue assessed on purely agricultural laods, (b) a surcharge on non-agricultural assessment in respect of laods used for non-agricultural purposes, and (c) a tax on laods and buildings which did not bear laod revenue.

As a result the CO'ls Act operated differently in the three zones. The properties of the petitioners were in the middle zone of Ahmedabad. Io their writ petitions under Art. 32 of the Constitution they contended that by reason of their situation the Cess Act operated unequally ae, in•t them became while the owners of oroperty in the other two zones bore either a surcharge on the land revenue or a tax on the

annual letting value, they bad to pay both the surcharge as well as the tax. Thus a violation of Art. 14 was alleged. It was also contended that the preparation of the assessment book on the basis of a ftat rate

n the fto_or area of a prooerty havin~ been struck down by his court 10 an earlier case (New Manek Chowk Spinning & Weaving Co. Ltd. etc.

v. Municipal Corporation of the City of Ahmedabad & Ors., [i967J 2 S.C.R. 679 the tax under s. 12 of the Cess Act was no longer leviable and that ' 12 being no longer operative. the Cess Act must fall as a whole The , validity of. th~ Act w!is also att; lcked on the ground that it did not provide for ob1ect1ons be10g considered.

HELD : (i) If as a result of the decision of this Court the assessment book needed revision or the principles on which valuation must be based had to be laid .down afrh by the Legislature, the provisions of s. 12 of the Cess Act did not fad automatically. Thev would fasten on the. ne~ valuation hen made. This caonot affect the validity of the section in the mean.!Jme. The section remains on the statute book tn be

worked into such assessment book as hereafter emerged. The argument that s. 12 had failed must therefore be rejected. [599 F-GJ

(ii) A double imposition on the middle zone was not by itself offen sive of Art. 14 of the Constitution unless it could be shown that the double tax in one zone as compared with the single tax in the other zones fell more heavily than the single tax. According to the earlier decision of this Court a new assessment book would be prepared. Even if, in the middle zone, the surehsrge and tax both had to be paid, tho rates might be so adjusted that the cess fell equitably on all landholders regard being had to the advantage; derived from the cess and the advan tages derived from the situation of the lands. [601 D-F]

(iii) The procedure for the levy of the cess cannot be said to offend natural justice in not providing opportunity for putting forward objections etc.

Tho cess is nothing more than an addition to othe.r taxes which allow the raising of objections and provide for appeals. There is no need for further scrutiny, objection or appeal. Nor is the Cess Act bad because it is not self-contained in the matter of assessment, thls being the usual method by which cesses are levied.

[601 H]

ORIGINAL JURISDICTION : Writ Petitions Nos. 12 and 17 to 21 of.1967, and 239, 240, 244 and 246 to 249 of 1966.

Petitions under Art. 32 of the Constitution of India for the enforcement of fundamental rights.

G. S. Pathak, M. S. Desai, K. M. Desai and Ravinder Narain, for the petitioner (in W.P. No. 12 of 1967).

Ravinder Narain, M. S. Desai and K. M. Desai, for the peti tioners (in W.Ps. Nos. 17·21 of 1967, 239, 240, 244 and 246- 249 of 1966).

N. S. Bindra, R. N. Sachthey and R. H. Dhebar, for respon- E dent No. 1 (in all the petitions).

M. N. Shroff and I. N. Shroff, for respondents Nos. 2 and 3 (in all the petitions.) The Judgment of the Court was delivered by Hidayatullah, J.

These are twelve Writ Petitions by diverse F textile mills and other factories of Ahmedabad. challenging th3 imposition of the Education Cess pursuant to the Gujarat Educa tion Cess Act, 1962. As the contents of all petitions are the same, it will be sufficient if we refer to the petition filed by the Ahmedabad Manufacturing & Calico Printing Co. Ltd. (Writ Petition No. 12 of 1967). Before vie do so, we shall state the G scheme of the Cess Act relevant to the present purpose.

On October 9, 1962, the Gujarat Education Cess Act, 1962 became law. It is an Act to provide for the creation of a fund to promote education iri the State of Gujarat.

The Act applies to the City of Ahmedabad as constituted under the Bombily Provincial Municipal Corporations Act, 1949.

Underhif!tehChess Athct, u . education cess is levied on lands and buildings w c ave e meanings given to them under the relevent Local Authority Law, here the Corporation Act. "Land", however, includes things

attached to earth or pennanently fastened to anything attached to the earth. Education cess is collected either as a surcp.age n lands assessed to land revenue or a tax on lands and buildings 10 urban areas and the charging section reads :

"s. 3 : For the purpose of providing for me cost of promoting education in the State of Gujarat, there shall be levied and collected in accordance with the provisions of this Act an education cess which shall consist of ........ (a ) a surcharge on all lands except lands which are included within a village site and not assessed to land revenue;

(b) a tax on lands and buildings in urban areas.

"Village Site" means the site of a village, tOWJ!- o~ ci~ dete~ mined under s. 126 of the relevant Code which 10 this case 1s the Bombay Land Revenue Code, 1879 and "urban area" means an area which is for the time being included in the limits of a city, municipal borough, etc.

The mode of calculation of the surcharge and of the tax and of their collection are contained in Chapters lit and IV. Chapter III deals with surcharge on land and is divided into two parts A and B.

Part A deals with surcharge on agricultural 1ands and part B deals with surcharge on lands used for non-agricultural purposes. Chapter IV deals with tax on lands and buildings. For the purposes of the present writ petitions, we shall have occasion to refer to s. 5 from Part A and s. 7 from part B of Ch. }[J and s. 12 from Ch. IV. Under s. 5, a surcharge is levied at the rate of 20 paise on every rupee of every sum assessed as land revenue on all lands (except lands included within a village site and not assessed to land revenue) F which are assessed or held for the purpose of agriculture and not used for any purpose unconnected with agriculture. In simple

language, it means the surcharge is 20% of the amount of land revenue assessed on land not within a village site, not assessed to land revenue, and not used for any purpose unconnected with agriculture. Under s. 7 the surcharge is additional to non-l\gricultural assessment of agricultural lands used for non-agricultural purposes.

The surcharge here ranges from 12!% to 75% of the non-agricultural assessment

depending on the kind of non-agricultural use of the land. Under s. 12, a-tax <in lands and buildings situated in urban area is levied at varying rates depending on the use to which the lands and buildings are out.

In every case, the tax is a percentag~ of the ann, ual letting value which means the rateable value or

an_nul letting vlue ?r gross annual letting value of lands and b!!ild10gs detennmed 10 accordance with the relevant local authonty law which as stated earlier is the Corporation Act. The

rate appli.cable to lands and buildings used for purposes of trade, commerce, industry, profession or business is 3% of the annual letting value. It has now been raised to 4.5% from October 1, 1965 .

. Annual letting value for the purpose of s. 12 is determined upon and .Pursuant tq the preparation of an assessment book reliiting to the p, ropertY. section under the corporation Act. . According to the asse5sment book, the annual letting value for the purpose of levying property tax on textile mills, factories,. buildings of universities, etc., is made on the basis of a fiat te of a montIµy rental of Rs. 6-lOas. for the processing portion and Rs. 5-4~. for the non-processing portion, per 100 sq. foot of the floor area Of sttch property situated in the urban. area. Education cess is calculated on the basis of the annual letting value determined in the assessment book by applying the percentage. The details of the working of the system are 'fully. described by our brother Mitter, in his judgment in Writ Petitions Nos. 133, 156-157, 159-171; 178" 206-209, 210 and 234of1966 decided on February 21, 1967, where these mills and factories have successfully challenged the assessment boOk. . By the decision of this. Court, the floor area method of determining the annual letting value of textile factories in Ahlil.edabad has been held to be bad, because the contractor's basis which is usually applied in such, calculations was not applied and the system actually adopted was likely to lead to discrimination.

The inclusion of plant and machinery has also been held to be illegal as the power of the

State Legislature to tax lands and buildings does not include a power to tax plant and machinery and the powers of the Corporation are co-terminus with those of the State Legislature by reason of s. 127 ( 4) of the Corporation Act.

It will be noticed that education cess is of three separate kinds. It is (a) a surcharge on land revenue assessed on purely agricultural lands, or (b) a surcharge on non-agricultural assessment in respect of lands used for non-agricultural purposes or ( c > a tax on lands and buildings which do not bear land revenue.

The properties in Ahmedabad are in three zones which may be described as demarcated by three concentric circles. In the inner zone are situated properties which do not bear limd revenue and no surcharge ls therefore payable in respect of lands and buildings.

Properties in this zone were exempted from the payment of land revenue under s. 128 of the Bombay Land Revenue Code in Ahmedabad in common with other towns and cities in which there had been formerly a city survey. m the middle zone are situated lands which though originally agricultural lands have been diverted to non-agricultural use and the lands and buildings therefore bear both municipal tax and non-agricQltural assessment. In the outer zone are lands which are purely agricultural and they bear land revenue but no other charge.

The textile mills of the petitioners are situated in the middle zone within the municipal limits of Ahmedabad and the main complaint in these cases is that by reason of their situation, these mills have to pay both the surcharge as well as the tax whereas the owners of property in the other two zones bear either a surcharge on the land revenue or a tax on the annual letting value.

It is also contended that the preparation of the assessment book having been struck down by this Court in the case cited earlier by us, the tax under s. 12 is no longer leviable and s. 12 having become inoperative, the Cess Act must fall as a whole.

The Cess Act does not provide for the procedure to arrive at the valuation of urban properties.

It takes the valuation from the assessment book. There is, therefore, no doubt that the annual Jetting value or rateable value is not presently available since the decision of this Court has struck down the assessment book itself.

This is conceded on behalf of the State of Gujarat.

Similarly the decision of this Court. that there is no power to include the value of plant and machinery in the rateable value is binding for purposes of the Cess Act.

The question is, does this make s. 12 to fail also ? In our judgment it does not.

Section 12 lays down that the tax on lands and buildings situated in urban areas shall be collected at the rate of 3 % of the annual letting value (now 4.5%) where a building or land is used for the purpose of trade, commerce, industry, profession or business.

This rate is applicable to the annual letting value as determined under the Bombay Provincial Municipal Corporations Act.

If as a result of. the decision of this Court the assessment book needs revision or the principles on which valuation must be based have to be laid down afresh by the Legislature, the provisions of s. 12 of the Cess Act do not fail automatically.

They will fasten on the new valuation when made. This cannot affect the validity of the section in the meantime. The section remains on the statute book to be worked into such assessment book as may hereafter emerge.

The argument that s. 12 has failed must be rejected.

The second argument that there is discrimination between properties in the middle zone and the inner zone may now be considered.

Chapter X of the Bombay Land Reventie Code deals with lands within the sites of villages, towns and cities.

Under s. 126, the limits of sites of villages,· towns and cities are fixed.

Under s. 127, the Bombay Rent-free Estates Act 1852, the Bombay Exemptions from Land Revenue (No 1) Adt 1863 and the Bombay Exemption from Land-revenue (No. 2°) Act, 1863 hve been made applicable to all lands, within the limits of the stte of any town or city, in which an inquiry into titles

has been made under the provisions of Bombay Act IV of 1868 A (now repealed), whi.ch had been ordinarily used for agricultural purposes only, but not to other lands. Section 128 of the Code then provides : . "s. 128 : The existing exemption from payment of land revenue of lands other than lands which have hitherto been ordinarily used for purposes of agricul

 B ture only, situate within the sites of towns and cities in , which an inquiry into titles has been made under the provisions of Bombay Act IV of 1868 shall be conti- Jll. nued .•.....• First-if such lands are situated in any town or city where there has been in former years a survey which the State Government recognise for the purpose of this section, and are shown in the maps or other records of such survey as being held wholly or partially exempt from the payment of land revenue;

" The exemption granted by s. 128 saves lands in the inner rone from the application of land revenue and the middle :zone bears the non-agricultural assessment since it does not fall within this exemption. It is subjected to non-agricultural assessment by reason of the non-agricultural use to which it is put.

The outer zone being outside the limits of village sites, town or city and composed of pure agricultural land is subject to land revenue only.

The three zones are the result of the operation of different laws in rural and urban areas.

Lands subjected to . city survey and assessed to property-tax are saved from the imposition of land revenue to which all lands are normally subject.

This exemption is a hundred years old and is based on the fact that land in the heart of the city ceases to be agricultural. Similarly lands in the outer circle are free from municipal assessment because they are outside municipal limits and do not benejit from the municipal services.

They are subject to land revenue only. The middle zone comes into being because the owners and holders of agricultural lands are not content to hold land for agriculture but divert it to other uses. In course of time the limits of the municipality have to be revised and these lands are taken within the municipality which means that they begin to share in the municipal services.

They are, therefore, assessed to municipal taxes as a return for the services rendered.

Now a cess is really a tax and it is generally imposed for providing money for oome stated administrative purpose.

It is

usually collected as an addition to an existing tax. l\nd so it is here. It is made as an addition to the tax already 1evied on lands and buildings. Since lands and buildings bear different.~ of taxes in the different zones, an attempt has been made to adiust the rates for the different zones presumably to make the levy, equitable, regard being had I? the s1tuation R!ld advanta~· '.to be derived from the expenditure on education.

No Objection has been made in the case that the tax levied in any zone is not commensurate with the advantages whkh are likely to acc!lle or that the burden has been made unduly high in any particular zone.

The only objections raised are three. The first and second are (a) that flat rate is applied in calculatin, g the annual Jetting value and (b) that plant and machinery are included in lands and buildings. . This has been corrected by the decision of our brother Mitter. The third is that the middle zone bears both the

surtJharge and the tax.

A doul/le imposition by itself is not offensive to Art. 14 of the Constitution unless It can be shown that the double tax in one zone as compared with the single tax in the other zones falls more heavily than the single tax. This is not attempted to be established except on the ground of fiat rate abovementioned.

Since that has been struck down already and .will presumably be replaced by some more accurate and equitable valuation, we do not see any reason to interfere. The decision of our brother Mitter will lead to a readjustment of the assessment book and then only the ground that the rate of cess in the middle zone exceeds the rate in the other two zones can be considered. As at present situated it is sufficient to say that there is no discrimination because the method of calculation of cess in the three zones is diflerent. Even if, in the middle zone, the surcharge and tax have to be paid, the rates, for aught we know, may be so adjusted that the cess falls equitably on all landholders regard being had to the advantages derived from the cess and the advantages derived from the situation of the lands.

. . Finlly there is the argument that the Cess Act, in not prov1dmg Its own procedure of assessment and in not giving the tax-payers an opportunity for putting forward their objections by way of representation, appeal or otherwise, before the tax is finally. fixed, offends the principles of natural justice. This argument .1s not correct. The cess is nothing more than an addition to existing taxes. As it is a percentage of another tax the determination of the cess is not by an independent asssment. It is an arithmetical calculation based on the result of assessment nder other A:t or Acts.

Those Acts allow the raising of objections and provide for appeals. It is only the result of assessment after scrutiny, objection and appeals which forms the basis for the application of a percentage. There is no need for further scrutiny, objection or appeals.

Nor is the Cess Act bad because it is not self-contained in the matter of assessment. In all cases

of imposition of cesses for special administrative purposes (such as health cess, road cess, education cess, etc.) this lnethod is followed.

Being an addition to another tax this is the only method possible. The legislation op. the subject of the imposition, levy and collection of a cess is made complete by incorporation of and reference to another piece of legislation. This practice is neither ineffective nor unconstitutional and cannot be said to be bad.

In the result we decline to issue a writ in these petitions.

They will be dismissed but the costs will be . borne as incurred.

G.C.

Petitions dismissed.

AHMEDABAD MANUFACTURING & CALICO. PRINTING CO., LTD., AHMEDABAD AND ORS

STATE OF GUJARAT & ORS

K. SUBBA RAo, C.J.

M. HIDAYATULLAH

R. S. BACHAWAT,

J

M. SHELAT

Constitution of India

Education Cus Act, 1962

Gujarat Education Cess Act, 1962

s. 12

Ahmedabad

Section 12

Cess Act whether survives-Cess Act

s. 123

Art. 32

Art. 14

s. 12

s. 12

s. 12

Art. 14

Nor is the Cess Act

Art. 32

Constitution of India

G. S. Pathak

M. S. Desai

K. M. Desai

Ravinder Narain

N. S. Bindra

R. N. Sachthey

R. H. Dhebar

M. N. Shroff

I. N. Shroff

Hidayatullah

October 9, 1962

Gujarat Education Cess Act, 1962

Gujarat

s. 3

s. 126

Bombay Land Revenue Code, 1879

s. 5

s. 7

s. 12

s. 5

s. 7

s. 12

October 1, 1965

s. 12

Mitter

February 21, 1967

Ahlil.edabad has

s. 127

s. 128

s. 12

s. 12

State of Gujarat

s. 12

Section 12

s. 12

s. 12

s. 126

s. 127

Bombay Rent-free Estates Act 1852

Bombay Act IV of 1868

Section 128

s. 128

Bombay Act IV of 1868

s. 128

Art. 14

Nor is the Cess Act


DANT SINGH GILL

SHANTI DEVI & ORS.

March 1, 1967

(K. N. WANCHOO, R. S, BACHAWAT AND V. BHARGAVA, JJ.J

Delhi & Ajmer Rent Control Act, 1952 (38 of 1952) and Delhi Rent Control Act (59 of 1958)-Swit for tjectment filed under 1952 Act-

'[tfl<Jnt's application under s. 50(2) of tht 1958 Act claiming that suit had abated-Application dismissed by trial court-Appeal filed under s. 34 of 1952 Act-Right of appeal whether governed by 1952 Act or 1958 Act-Effect of s. 51 of 1958 Act.

A suit for ejectment on the ground of failing to pay arrears of rent was instituted against the appellaat by the respondents under the provisions of the Delhi & Ajme'r .Rent Control Act, 1952 on February 27,

1958. On February 9, .1959 the Delhi Rent Control Act, 1958 came into force and became applicable to the premises in question. On March 13, 1961 the appellant, relying on the provisions of s. 50(2) of the Act of 1958, filed an apphcation before the trial court requesting it to hold that the suit had abated on the ground that the suit related to premises the construction of which bad been completed after the !st day of June 1951 but before the 9th day of June 1955. The trial court, not satisfied that the premises was constructed during the said period,, rejected the application.

An appeal purporting to be under s. 34 of the 1952 Act was filed before the District Judge who held that the order of the trial court was under the Act of 1958 so that no appeal lay. The High Court dismissed the appellant's revision application.

Appeal to this Court v.as filed under Art. 136 of the Constitution.

HELD: (i) The saving clause of stib-s. (2) of s. 57 makes it clear that the present suit which was pending under the Act of 1952 was to be continued and disposed of in accordance with the provisions of that Act though under the first proviso the court deciding the suit was required to have regard to the provisions of the Act of 1958. [62 EJ Further the second proviso to s. 57(2) of the Act of 1952 laid down that the provisions for appeal under the Act of 1952 were to continue in force in respect of suits and proceedings disposed of thereunder. Consequently the right of appeal against the order continued to be governed by s. 34 of. the Act of 1952. (62 OHJ

However the trial Judge had only decided a preliminary issue and the order not being a final order was not appealable under s. 34 of the Act of 1952. (63 HJ

Central Bank of India v. Gokal Chand, [1967] 1 S.C.R. 310, relied on.

Ram Charan Das v. Hira Nand, A.LR. 1945 Lah. 298, referred to.

(ii) The appellant's application was not one under s. 33 of the Act of 1952 and the order disposing it of was not a final order on that H ground either. [64 C-D]

It was open to the appellant to challenge the correctness of the dedsion of the trial court in the appeal against the decree if passed against him. [64 E-FJ

CML APPELLATE JURISDICTION : Civil Appeal No. 2207 of 1966.

Appeal by special leave from the judgment and order dated July 21, 1966 of the Punjab High Court Circuit Bench at Delhi in Civil Revision No. 319-D of 1965.

Pritam Singh Safeer, for the appellant.

S. P. Mahajan and Lily Thomas, for the respondents.

The Judgment of the Court was delivered by Bhargava, J. A suit for ejectment on the ground of failing to pay arrears of rent was instituted against the appellant, Bant Singh Gill, by the respondents under the provisions of the Delhi and Ajmer Rent Control Act, 1952 (No. 38 of 1952)-hereinafter referred to as "the Act of 1952", on the 27th February, 1958.

On 9th February, 1959, the Delhi Rent Control Act, 1958 (No. 59 of 1958 )-hereinafter referred to as "the Act of 1958'', camo into force and became applicable to the premises which were the subject-matter of the pending suit.

On 13th March, 1961, the appellant, relying on the provisions of s. 50(2) of the Act of 1958, filed an aoplication before the trial Court requesting it to hold that the suit had abated on the ground that the suit related to premises the construction of which had been completed aftt:r the 1st day of June, 1951, but before the 9th day of June, 1955.

The trial Court, after taking into account the evidence, recorded a finding that the appellant had failed to prove that the premises had been completed during this period mentioned in s. 50(2) of the Act of 1958. and, consequently, rejected the application and held that the suit was to proceed on merits. Against that order, the appellant filed an appeal before the District Court which was heard by the Additional Senior Sub-Judge exercising cnhanc-. ed appellate powers in Delhi. The appeal purported to be under s. 34 of the Act of 1952.

The appellate Court held that the order nassed by the trial Court was not an order under the Act of 1952. but an order under the Act of 1958, so that 'no appeal lay, and dismissed the aopeal on the ground of non-maintainability. The revision filed by the appellant before the Circuit Bench of the High Court of Punjab at Delhi failed, and the appellant has now come un to this Court by special leave in this appeal.

It annears to us that both the first appellate Court and the High Court committed an. error in. holding .that no anoeal lay, as a result of their failure to notice the orovisions of s. "7 of the Act of 1958.

The suit. as originally instituted, was clearly a case under s. 33 of the Act of 1952 which is as follows :- ·

"3 3. ( 1 ) Any civil Court in the Siate of Delhi or Ajmer which has jurisdiction to hear and decide a suit for recovery of possession of any premises shall have

jurisdiction to hear and decide any case under this Act relating to such premises if it has pecuniary jurisdiction and is otherwise competent to hear and decide such a case under any law for the time being in force.

(2) The value of any case under this Act, for t11e purposes of the pecuniary jurisdiction of the Court, shall be determined by the amount of rent which is or would be payable for a period of twelve months, calculated according to the highest amount claimed in the case:

Provided that in the case of any proceeding based on the certificate of the Controller under section 28, such value shall be determined by the amount of rent which is or would be payable for a period of one month. ( 3) If any question arises whether any suit, application or other proceeding is a case under this Act, the question shall be determined by the Court.

( 4) For the purposes of this Chapter, a case under this Act, includes any suit, application or other proceeding under this Act and also includes any claim or question arising out of this Act or any of its provision.~. but does not include any proceeding which a Controller is empowered to decide under Chapter IV."

Section 34 of that Act, which confers the right of appeal to an aggrieved person against any decree or order of a Court under that Act, runs as follows :-

"34. ( 1) Any person aggrieved by any decree or order of a court passed under this Act may, in such manner as may be prescribed, prefer an appeal- ( a) to the court of the senior subordinate judge, if any, where the value of the case does not exceed two thousand rupees : Provided that where there is no senior subordinate judge, the appeal shall lie to the district judge;

(b) to the court of the district judge, where the value of the case exceeds two thousand rupees but does not exceed ten thousand rupees; and ( c) to the High Court, where the value of the case exceeds ten thousand rupees.

(2) No second appeal shall lie from any decree or order passed in any case under this Act."

It is correct that the claim of the appellant was that the suit abated because of the applicability of section 50(2) of the Act of 1958;

but, in view of the provisions of s. 57 of that Act, it is clear that an order of abatement will be an order under the Act of 1952 and not under the Act of 1958. Section 57 of the Act of 1958 reads:-

"57. (1) The Delhi and Ajmer Rent Control Act, 1952, in so far as it is applicable to the Union territory of Delhi, is hereby repealed.

(2) Notwithstanding such repeal, all suits and other proceedings under the said Act pending, at the commencement of this Act, before any court or other authority shall be . continued and disposed of in accordance with the provisions of the said Act, as if the said Act had continued in force and this Act had not been passed :

Provided that in any such suit or proceeding for the fixation of standard rent or for the eviction of a tenant from any premises to which section 54 does not apply, the court or ot!1er authority shall have regard to the provisions of this Act:

Provided further that the provisions for appeal under the said Act shall continue in force in respect of suits and proceedings disposed of thereunder."

The saving clause in sub-s. ( 2) of s. 57 makes it clear that the present suit, which was pending under the Act of 1952, was to be continued and disposed of in accordance with the provisions of that Act, though, under the first proviso, the court deciding the suit was required to have regard to the provisions of the Act of 1958.

Consequently, when deciding the question whether that pending suit had abated or not, the Court was still functioning as a court seized of jurisdiction under the Act of 1952 over the pending suit, though, in deciding that suit, the court had to have regard to the provision contained in s. 50( 2) of the Act of

1958. In thus applying the provision of s. 50(2) of the Act of 1958 to the suit pending before it, the Court was still acting under the Act of 1952, and the order passed for abatement or refusing to abate the suit and to continue its trial was an order under the Act of 1952 under which the Court was still continuing to exercise its jurisdiction. Further, the second provise to s. 57(2) of the Act of 1958 laid down that the provisions for appeal under the Act of 1952 were to continue.in force in respect of suits arid proceedings disposed of thereunder.

Consequently, the right of appeal against the order continued to be governed by s. 34 of the Act of 1952, and the appeal was wrongly dismissed by the Additional Senior Sub-Judge on the ground that no a; Jpeal lay.

The order of that Court as well as the revisional order of the High Court were, therefore, incorrect.

~ /I \•

\.-

However, when this appeal came up for hearing before us, learned counsel for the respondents raised another point for challenging the competency of the appeal that was filed against the order of the trial Court. It was urged that the order, rejecting the application of the appellant to recorq the abatement of the suit and directing continuance of the suit, was not an order of such B a nature against which an appeal could be filed under s. 34 of

the Act of 1952. The word "order" is used in s. 34 without any limitations, with the exception that it must be an order of a court passed under the Act of 1952; but it is contended that this word cannot be interpreted so widely as to include all interlocutory orders or other similar orders passed in the course of the trial of a suit.

This aspect came up for consideration before this Court C when interpreting s. 38(1) of the Act of 1958 in which also a provision for appeals has been made, and the language used is very wide inasmuch as it is laid down that "an appeal shall lie from every order of the Controller made under this Act. ..... " The extent of this right of appeal under s. 38 ( 1) was considered by this Court in the Central Bank of India Ltd. v.

Gokal D Chand,(') and it was held that "the object of s. 38(1) is to give a right of appeal to a party aggrieved by some order which affects his right or liability. In the context of s. 38(1), the words "every

order of the Controller made under this Act, though very wide. do not include interlocutory orders, which are merely prJcedural and do not affect the rights or liabilities of the partic&." The E principle was thus recognised that the word "order" ascd in such

context is not wide enough to include every order. whatever be its nature, and particularly orders which only dispose of interlocutory matters. In the case before us also, all that was done by the application presented by the appellant on the l 3!h March, 1961, was to raise a preliminary issue about the maintainability r of the suit on the ground that Ifie suit had abated by virtue of s.

50(2) of the Act of 1958. The Court went into that issue and decided it against the appellant.

If the decision had been in favour of the appellant and the suit had been dismissed, no doubt there would have been a final order in the suit having the effect of a decree (see the decision of the Full Bench of the Lahore

High Court in Ram Charan Das v. Hira Nand( 2). On the other hand, if, as in the present case, it is held that the suit has not abated and its trial is to continue, there is no final order deciding the rights or liabilities of the parties to the suit. Tue rights and liabilities have yet to be decided after full tr'"' has been gone through.

The decision by the court is only in the nature of a finding on a preliminary issue on which would depend the maintainability of the suit.

Such a finding cannot be held to be an order for purposes of s. 34 of the Act of 1952, and, consequently.

(1) (1967] 1 S.C.R. 310. (~) A.T.R. 1945 Lah. 298.

64 SUPllEMB COURT REPORTS

no appeal against such an order would be maintainable. It was iadicated by this Court in the case of the Central Bank of India

Ltd. ( 1) that, in such a case, it is open to the appellant to canvass the error, defect, or irregularity, if any, in the order in an appeal from the final order passed in the proceedings for eviction. In the present case also, therefore, it is clearly open to the appellant to raise this plea of abatement of the suit; if and when he files an appeal against a decree for eviction passed by the trial .Court.

Learned counsel for the appellant relied on the language of sub-s. (4) of s. 33 of the Act of 1952 to urge.that the appellant's application, requesting the trial Court to record abatement of the suit, should be held to be a case under s. 3 3 (1 ) of that Act, and the order, rejecting that application, should be held to be, therefore, an order finally disposing of that case.

This submission made by learned counsel ignores the nature of the application and the effect of the order made on it by the trial Court. As we have indicated earlier, the application was in the nature of a request to the court to decide a preliminary issue whether the suit had abated or was still maintainable, and to dismiss the suit on recording the finding that it had abated. The application was, therefore, one raising a preliminary issue as to the maintainability of the suit; and, in fact, the request for raising the issue was allowed by the trial Court by going into that issue and recording a finding.

On that finding, the suit was clearly maintainable.

Such a finding on a preliminary issue, which relates to the maintainability of a suit, is not an order of a nature against which an appeal can lie.

As we ha:ve indicated .above, the only remedy available to the appellant was, and still is, to challenge the correctness of the decision of the trial Court in the appeal against the decree, if passed against him.

The appeal, consequently, fails and is dismissed with costs. o.c Appeal dismised

(I} [1967] I S.C.R. 310.

DANT SINGH GILL

SHANTI DEVI & ORS

March 1, 1967

K. N. WANCHOO

BACHAWAT

V. BHARGAVA, JJ

Ajmer Rent Control Act, 1952

Delhi Rent Control Act

s. 50(2)

s. 34

s. 51

Rent Control Act, 1952

February 27,

1958

February 9, .1959

Delhi Rent Control Act, 1958

March 13, 1961

s. 50(2)

9th day of June 1955

s. 34

Art. 136

s. 57

s. 57(2)

s. 34

s. 34

[1967] 1 S.C.R. 310

s. 33

S. P. Mahajan

Lily Thomas

Bhargava

Delhi and Ajmer Rent Control Act, 1952

Delhi Rent Control Act, 1958

13th March, 1961

s. 50(2)

s. 50(2)

Delhi

s. 34

s. 33

Ajmer

section 28

Section 34

section 50(2)

s. 57

Section 57

Delhi and Ajmer Rent Control Act, 1952

section 54

s. 57

s. 50( 2)

s. 50(2)

s. 57(2)

s. 34

s. 34

s. 34

s. 38(1)

s. 38

s. 38(1)

s. 38(1)

s.

50(2)

Lahore

High Court

s. 34

(1967] 1 S.C.R. 310

s. 33

s. 3