EVEREST WOOLLEN MILLS Vs. STATE OF PUNJAB

JUDGEMENT

(1.) THIS petition under Articles 226 and 227 of the Constitution was admitted by the Motion Bench to a Division Bench because it was urged that levy of six percent, by way of sales tax by the Punjab Government on lubricants and chemicals used for the manufacture of blankets is a hindrance in the free right of inter-State trade or commerce and is, therefore, violative of the constitutional mandate in Article 301 of the Constitution that commerce and intercourse throughout the territory of India shall be free. The argument as put, though ingenious, was prima facie attractive and apparently, it was for this reason that it was admitted to a Division Bench.

(2.) THE facts pleaded in the writ petition are that the petitioner Messrs Everest Woollen Mills, Ludhiana, a registered dealer both tinder the Punjab General Sales Tax Act and the Central Sales Tax Act, deals in the manufacture and sale of woollen blankets and also sometimes manufactures and sells yarn. The petitioner has, therefore, to make purchases of ra materials for the purpose of manufacturing such blankets and also lubricants and other chemicals which are essential for running the machinery for their manufacture. In the year 1963-64, the petitioner was assessed under the Punjab General Sales Tax Act to a sum of Rs. 2,800. 64 out of which a sum of Rs. 2,200 had already been paid and the balance was paid thereafter. The petitioner had purchased lubricants of the value of Rs. 31,656. 78. Lubricants of the value of Rs. 7,396. 95 out of the total quantity had been purchased from outside the State of Punjab. The quantity purchased from outside the State of Punjab was subjected to an inter- State tax of two per cent, under the Central Sales Tax Act, as these lubricants were purchased for using them for manufacturing purposes. Deducting the purchase price of lubricants purchased from outside the State from the gross purchase price of the entire quantity, the Assessing Authority came to the conclusion that the petitioner was liable to purchase tax at Rs. 24,259. 83. Out of this amount, a sum of Rs. 3,465. 69 was also deducted by the Assessing Authority as the amount spent on the purchase of lubricants used in the manufacture of yarn which is included in "taxable goods". Deducting this amount from Rs. 24,259. 83, the balance came to Rs. 20,794. 14. To this was added a sum of Rs. 6,000 spent in purchasing chemicals used in the manufacture of tax-free goods etc. , bringing the total value of goods purchased to Rs. 26,794. 14 which was subjected to tax under the Punjab General Sales Tax Act. On this amount, the purchase tax levied came to Rs. 1,736. 05 computed according to the rates fixed at different periods of the period of assessment during the year in question. It is this amount which is the subject-matter of challenge in the present proceedings and the principal argument urged is that blankets which are manufactured by the petitioner-firm are not tax- free on their sale as has been wrongly held by the Assessing Authority. It is argued that on the manufacture of blankets, the petitioner is liable to pay five per cent, excise duty and an additional excise duty has since been levied by the Central Government in lieu of sales tax. This additional excise duty in lieu of sales tax has been imposed upon the manufacture of blankets with the consent of the Punjab Government, with the result that this must be construed to be in the nature of either sales tax or purchase tax which was actually been handed over by the Central Government to the Punjab Government. It has been averred that this position is also clear from the budget of the Central Government as laid before the Parliament and reference has also been made to the Explanatory Memorandum on the budget of the Central Government for 1965-66 as laid before the Parliament.

(3.) OUR attention has in support of this contention been drawn to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Act 58 of 1957), which was published in the Government Gazette on 26th December, 1957. This Act, as the Preamble shows, was intended to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net proceeds thereof among the States in pursuance of the principles of distribution formulated, and the recommendations made, by the Finance Commission in its report dated 30th September, 1957, and to declare those goods to be of special importance in inter-State trade or commerce. The counsel has also tried to seek assistance from the object of this statutory measure by contending that the additional duty has been imposed in replacement of the sales tax levied by the Union and the States. Section 3 of this enactment authorises levy and collection of additional duty on certain articles including woollen fabrics produced or manufactured in India and the First Schedule fixes the amount of duty. Section 4 of this Act provides for the distribution of the additional duty levied, amongst the States and the Second Schedule contains the details of such distribution. Certain goods including woollen fabrics have been declared to be of special importance in inter-State trade or commerce and every sales tax la of a State, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of such declared goods, has been subjected, from 1st April, 1958, to the restrictions and conditions specified in Section 15 of the Central Sales Tax Act (No. 74 of 1956 ). As a consequence of this Act, the Punjab Legislature passed the Punjab Textiles and Sugar (Existing Stocks) Purchase Tax and Miscellaneous Provisions Act (No. 8 of 1958) for providing for the levy of purchase tax on stocks of textiles and sugar and for abolition of tax on sales of certain goods etc. Section 20 of this Act amended, inter alia, Schedule "b" to the East Punjab General Sales Tax Act (46 of 1948) by including woollen textiles in the list of tax-free goods within the contemplation of Section 6 of that Act. The argument boldy pressed is that although Act No. 58 of 1957 passed by the Parliament expressly purports to levy additional duties of excise, nevertheless, it must be construed to amount in pith and substance to a tax under the Punjab General Sales Tax Act, and, therefore, the blankets cannot be considered to constitute tax-free goods within the meaning of the latter statute. In my opinion, the submission is completely devoid of force and is extremely difficult to sustain. Objects and reasons of a statute, as is wellknown cannot control the plain meaning of statutory language ; they can only be referred to for the limited purpose of discovering the historical background leading up to the legislation in order to understand the mischief sought to be remedied, and that too if there is some ambiguity in the language of the Act. In the case in hand, there is absolutely no ambiguity in the statutory language and the duty of excise sought to be imposed can by no stretch be considered, because of the statutory objects and reasons, to be a tax either on sale or purchase of the goods concerned. As observed by a Bench of this Court in Nabha Rice and Oil Mills v. State of Punjab A. I. R. 1963 Punj. 549 an excise duty is attracted when goods are manufactured or produced, for it is the manufacture or production of goods alone which forms the basis of excise duty, whereas the base on which purchase tax operates is the transaction of sale or purchase. Act No. 58 of 1957 has clearly nothing to do with the transaction of sale or purchase and, therefore, I do not find it possible to construe this levy as amounting to a sale or purchase tax on a transaction which brings about transfer of the ownership. In pith and substance excise duty and sale or purchase tax are essentially different. Besides, merely because an excise duty is intended to replace a sale or purchase tax does not of itself by any logic, convert the former into latter. No principle nor any precedent has been cited in support of his submission by the petitioner's counsel; of course, there is no statutory provision on which this argument has been shown to be founded.