Mobile View
Main Search Forums Advanced Search Disclaimer
Cites 72 docs - [View All]
The Central Sales Tax Act, 1956
Section 6 in The Central Sales Tax Act, 1956
Section 3 in The Central Sales Tax Act, 1956
State Of Tamil Nadu vs M. K Kandaswami Etc. Etc on 15 July, 1975
Section 2 in The Central Sales Tax Act, 1956
Citedby 1 docs
Cheminova India Ltd. vs Sales Tax Officer on 9 November, 2001

User Queries
Gujarat High Court
Madhu Silica Private Limited And ... vs State Of Gujarat And Ors. on 28 February, 1991
Equivalent citations: 1992 85 STC 258 Guj
Author: S Majmudar
Bench: G Ray, S Majmudar

JUDGMENT

S.B. Majmudar, J.

1. In this group of petitions, a common question of vires of section 15B of the Gujarat Sales Tax Act, 1969, as amended by section 2 of the Gujarat Sales Tax (Amendment) Act, 1990, arises for consideration. It is the contention of the petitioners that the said provision is beyond the legislative competence of the State Legislature.

2. In order to appreciate this common grievance of the petitioners, it is necessary to not a few introductory facts :

3. I. Introductory facts :

The petitioners are dealers registered under the provisions of the Gujarat Sales Tax Act, 1969 ("the Act" for short). They carry on the activity of manufacturing and selling various goods in this State. For the purpose, they require raw materials which are to be used in manufacturing the end-products. The raw materials purchased by them in the State and used in the manufacturing process have been subjected to purchase tax by the impugned provisions. The petitioners contend that the State Legislature has no competence to impose such tax as such tax does not fall within any of the entries of List II of the Seventh Schedule to the Constitution, viz., the State List especially entry 54 thereof. They have joined in these petitions State of Gujarat as respondent No. 1 and the authorities exercising powers under the Act as other respondents. As the petitions involve common questions of law, they were all heard together and are being disposed of by this common judgment.

4. The common grievance of the petitioners is required to be examined in the background of the statutory settings and their historical backdrop.

5. II. Statutory settings :

The Act has been enacted by the State Legislature in exercise of its powers under entry 54 of the State List. The said entry reads as under :

"Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I."

6. The said Act is operative in the State from 6th May, 1970. By section 2 of the Gujarat Sales Tax (Third Amendment) Act, 1986, the Legislature of the first respondent-State had inserted section 15B and 15C from 1st April, 1986, in the Act providing in substance levy of tax on the taxable goods consigned by the dealer outside the State of Gujarat to the extent of 2 per cent of the purchase price of the raw materials used in the manufacture of such taxable goods so consigned. However, the Gujarat Sales Tax (Amendment) Act, 1987, section 15C was deleted from 1st April, 1987 and new section 15B was substituted from 1st April, 1987, for old section. New section 15B so substituted read as under :

"Where any dealer liable to pay tax under this Act uses any goods other than declared goods purchased by him or through commission agent as raw or processing materials or consumable stores (irrespective of whether such goods are prohibited goods or not) in the manufacture of taxable goods and despatches any of the goods so manufactured to his own place of business or to his agent's place of business situate outside the State but within India such dealer shall be liable to pay, in addition to any tax paid or payable under other provisions of this Act, a purchase tax, a purchase tax at the rate of two paise in the rupee on the purchase price of such raw or processing materials or consumable stores used in the goods so manufactured and despatched and accordingly he shall include the purchase price thereof in his turnover of purchases is his declaration or return under section 40 which he is to furnish next thereafter :

Provided that where the raw materials so used is bullion or specie, the purchase tax payable on such bullion or specie under this section shall not exceed the aggregate of the rates of sales tax and the general sales tax payable on bullion or specie."

7. A similar provision was operative in the Maharashtra State being section 13AA of the Bombay Sales Tax Act, 1959. The said Bombay provision which was then existing read as under :

"Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable gods and despatches the goods, so manufactured, to his own place of business or to his agent's place of business situated outside the State within India, then such dealer shall be liable to pay, in addition to the sale tax paid or payable, or as the case may be, the purchase tax levied or leviable, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture, and accordingly, the dealer shall include purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter."

8. The vires of the aforesaid section 13AA of the Bombay Act came up for consideration before the Supreme Court in the case of Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71. In that case, the Supreme Court considered section 13AA of the Bombay Act as well as identical pari materia provisions in the Haryana Act. Sabyasachi Mukharji, J. (as he then was) sitting with Ranganathan, J., in the aforesaid case took the view that the said provision was ultra vires the State legislation as under the guise of purchase tax, what was sought to be levied was consignment tax which was beyond the competence of the State Legislature and was not covered by entry 54 of the State List. Ranganathan, J., by a separate concurring judgment also endorsed the said view. The result was that such a provision was treated to be beyond entry 54 of the State List and would be covered only by entry 92B of the Union List being tax on consignment. Entry 92B of the Union List reads as under :

"92B. Taxes on the consignment of goods (whether the consignment is to the person making it or to any other person) where such consignment takes place in the course of inter-State trade or commerce."

9. Thereafter, the Maharashtra Legislature substituted earlier section 13AA of the Maharashtra Act which was faulted by the Supreme Court and replaced it by new section 13AA of the Maharashtra Act with retrospective effect from 1st July, 1982. For that purpose, earlier Maharashtra Ordinance No. 9 of 1989 was issued and thereafter is was followed by Maharashtra Act 2 of 1990 which replaced it. The said new section 13AA introduced as aforesaid in the Maharashtra Act may be styled as new Bombay provision. The said provision read as under :

"(1) Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable goods, then, unless the goods so manufactured are sold by the dealer, there shall be levied, in addition to the sales tax, paid or payable, if any, or as the case may be, the purchase tax levied or leviable, if any, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods, so used in the manufacture, and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter.

(2) A dealer who becomes liable to pay tax under sub-section (1) shall, unless he had already furnished a return including therein the turnover of such purchases during the period commencing on the 1st July, 1985 and ending on the day immediately preceding the date of commencement of the Bombay Sales Tax (Amendment) Act, 1990, or is exempted from furnishing such return, by a general or special order issued in this behalf by the Commissioner, furnish a consolidated return including therein the turnover of such purchases for the period aforesaid, within a period aforesaid, within a period of three months from the date of the commencement of the said Act."

10. This provision was challenged by some of the dealers before the Maharashtra High court. A Division Bench of the Maharashtra High Court consisting of Bharucha and Srikrishna, JJ., by their decision dated 28th August, 1990, rendered in Writ Petition Nos. 477 of 1990 and group (Hindustan Lever Ltd. v. State of Maharashtra [1990] 79 STC 255) struck down the said provision by taking the view that the said provision sought to impose levy in the nature of excise which was beyond the legislative competence of the State Legislature and would not be covered by entry 54 of the State List, meaning thereby, if at all, it would be covered by entry 84 of the Union List, Entry 84 of the Union List reads as under :

"Duties of excise on tobacco and other goods manufactured or produced in India except -

(a) alcoholic liquors for human consumption;

(b) opium, Indian hemp and other narcotic drugs and narcotics,

but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry."

11. So far as Gujarat provision of section 15B was concerned, a number of writ petitions were filed in this Court challenging the vires of this provision on the basis of the Supreme Court decision in Goodyear's case [1990] 76 STC 71. It was contended that Gujarat provision of section 15B was pari materia with the old Bombay provision of section 13AA which was struck down by the Supreme Court in the aforesaid decision and on a parity of reasoning, it was required to be held that Gujarat provision of section 15B was also ultra vires the State Legislature being tax on consignment covered by entry 92B of the Union List and not by entry 54 of the State List. This group of petitions was placed for final hearing before this Court, but before they could be proceeded further, the first respondent and promulgated an Ordinance deleting old section 15B from the statute book and instead, inserting new provision of section 15B. The said Ordinance being Ordinance 3 of 1990 was gazetted on 20th April, 1990. By section 2 of the said Ordinance, it was laid down that during the period of operation of this Ordinance, the Gujarat Sales Tax Act, 1969, being the Principal Act shall have effect subject to the amendment specified in section 3. Section 3 of the Ordinance substituted new section 15B for old section 15B to the following effect :

"15B. Where a dealer who being liable to pay tax under this Act purchases either directly or through a commission agent any goods specified in Schedule II or III (not being declared goods) for use a raw or processing materials or consumable stores, in the manufacture of taxable gods, then there shall be levied in addition to any tax levied under the other provisions of this Act, a purchase tax at the rate of -

(a) two paise in a rupee on the turnover of such purchases made during the period commencing on the 1st April, 1986 and ending on the 5th August, 1988; and,

(b) four paise in a rupee on the turnover of such purchases made at any time after the 5th August, 1988 :

Provided that where the raw material purchased for use in the manufacture of goods are bullion or specie, the rate of purchase tax on the turnover of purchases of such raw materials shall not exceed the aggregate of the rate of sale tax and general sales tax leviable on bullion or specie under entry 1 in Schedule III."

12. As the oil section 15B was impugned in the pending petitions and it got substituted by new provision, earlier petitions were disposed of by a Division Bench of this Court consisting of A. P. Ravani and R. A. Mehta, as infructuous.

13. The aforesaid Gujarat Ordinance was followed by a gazetted notification of the Finance Department of the first respondent dated 1st May, 1990, whereunder, the first respondent amended the Gujarat Sales Tax Rules, 1970 and introduced a new rule being rule 42E after existing rule 42E. The said rule 42E reads as under :

"In assessing the purchase tax levied under section 15B and payable by a dealer (hereinafter referred to as 'the assessee') the Commissioner shall subject to conditions of rule 47 in so far as they apply, and further conditions specified below, grant him a drawback, set-off or as the case may be, refund of the whole of the purchase tax paid in respect of any earlier purchase of goods used by him, as raw materials or processing materials, or consumable stores, in the manufacture of taxable goods.

Conditions

(1) the assessee is a registered dealer,

(2) the goods purchased are taxable goods other than declared goods,

(3) the said goods have been used by the assessee within the State as raw materials or processing materials or consumable stores in the manufacture of taxable goods,

(4) the foods so manufactured have been sold by the assessee in the State of Gujarat."

14. The aforesaid Gujarat Ordinance was repealed by Gujarat Act 6 of 1990 being the Gujarat Sales Tax (Amendment) Act, 1990. By that amending Act, earlier section 15B was retrospectively amended and replaced by new provision of section 15B which is challenged in present proceedings. The said provision impugned in this group of petitions reads as under -

"Where a dealer who being liable to pay tax under this Act purchases either directly or through a commission agent any taxable goods (not being declared goods) and uses them as raw or processing materials or consumable stores, in the manufacture of taxable goods, then there shall be levied in addition to any tax levied under the other provisions of this Act, a purchase tax at the rate of -

(a) two paise in a rupee on the turnover of such purchases made during the period commencing on the 1st April, 1986 and ending on the 5th August, 1988; and

(b) four paise in a rupee on the turnover of such purchases made at any time after the 5th August, 1988 :

Provided that ......."

15. This newly inserted section 15B is hereinafter referred to as new Gujarat provision that has triggered off the present group of petitions. The question of vires of the impugned new Gujarat provision will have to be decided in the background of the aforesaid statutory settings and their historical backdrop.

16. III. Rival contentions : Mr. Pathak for one of the petitioners vehemently contended that the ratio of the Supreme Court in Goodyear case [1990] 76 STC 71 squarely applies to the facts of the present case. That the new Gujarat provision in substance seeks to impose additional tax which though guised as purchase tax is in substance a tax on consignment and that only cosmetic changes have been made in the new Gujarat provision as compared to old one which has been repealed by the Legislature. It was submitted that as per the ratio of Goodyear's case [1990] 76 STC 71 (SC) the taxing event in the impugned provision is to be treated to be one occurring when goods manufactured out of the use of purchased raw materials get consigned outside the State of Gujarat and when their sale in the State becomes an impossibility. That this effect clearly emerges on account of combined operation of the impugned new Gujarat provision and rule 42E. That both of them protect a well-knit and comprehensive legislative scheme and viewed in that light, the scheme cannot be sustained by entry 54 of the State List and in pith and substance, the legislation falls within entry 92B of the Union List. It was further contended that the decisions of the Kerala High Court in Malabar Fruit Products Company v. Sales Tax Officer [1972] 30 STC 537 and Yusuf Shabeer v. State of Kerala [1973] 32 STC 359 cannot help the respondents as these decisions will have to be read in the light of pronouncement of the Supreme Court about emergence of taxing event as authoritatively laid down in Goodyear's case [1990] 76 STC 71. That in Goodyear's case [1990] 76 STC 71, the Supreme Court has distinguished these judgments on the ground that they had not laid down anything on the question with which the Supreme Court was concerned. It was further submitted that decision of three-member Bench of the Supreme Court reported in State of Tamil Nadu v. Kandaswami [1975] 36 STC 191 will also not be of any avail to the respondents as in that case, the Supreme Court was not concerned with the question which is posed for out consideration. That it was concerned with the question of true construction of the Tamil Nadu General Sales Tax Act. That decision in [1975] 36 STC 191 (State of Tamil Nadu v. Kandaswami) is considered by the later decision of the Supreme Court in goodyear case [1990] 76 STC 71 and had been distinguished. He further submitted that under section 15B of the new Gujarat provision, levy of purchase tax on the purchase of raw materials, etc., is not attracted on the event of purchase but on the event of user of the goods purchased for manufacture of taxable goods, that tax as levied under the impugned provision not on the purchase of raw materials simpliciter but on the event of their use in manufacture of taxable goods, that is on the act of manufacture of taxable goods. It was, therefore, alternatively contended that the impugned new Gujarat provision is in the nature of excise and should be stuck down as ultra vires the State Legislature and beyond its legislative competence on the same line on which the Division Bench of the Maharashtra High Court struck down the pari materia provision under the new Bombay section 13AA in Writ Petition No. 477 of 1990 and group (Hindustan Lever Ltd. v. State of Maharashtra [1990] 79 STC 255). Mr. Pathak, placing reliance on the decision of the Supreme Court in Goodyear's case [1990] 76 STC 71, submitted that taxable event is that which on its occurrence creates or attracts the liability to tax. That such liability does not exist or accrue at any earlier or later point of time. That the identification of the subject-matter of a tax is to be found in the charging section. That the charging event is the event the occurrence of which immediately attracts the charge. Such taxable event cannot be postponed to the occurrence of the subsequent condition and in that event, it would be the subsequent condition the occurrence of which would attract the charge which will be taxable event. Taking a clue from the aforesaid observations of the Supreme Court, it was vehemently contended by Mr. Pathak that as the new Gujarat provision stands to-day, taxable event projected by it is not purchase of raw material by a dealer in the Gujarat State but its use in the manufacture of taxable goods and such event, therefore, clearly partakes the character of duty on manufacture and it becomes analogous to excise duty. Mr. Pathak also submitted that the ratio of the Constitution bench decision of the Supreme Court in Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212, will be of no assistance to the respondents as in the said case, the Supreme Court was concerned with the provision imposing purchase tax on raw material for use in manufacturing goods; while in the present case, purchase simpliciter of raw materials is not to be taxed but only when they are used in manufacture of taxable goods that levy is imposed, that is, when such purchased raw materials are used and consequently taxing event in the present case becomes complete on such user and has nothing to do with the original intention underlying the purchase.

17. Mr. Pathak alternatively contended that even assuming that it is not a duty in the nature of excise, the said provision when read with rule 42E would clearly project a picture of being consignment tax disguised as purchase tax; and, therefore, the ratio of Goodyear case [1990] 76 STC 71 (SC), would directly get attracted for voiding this provision. It was next contended by Mr. Pathak that in any case, the impugned new Gujarat provision of section 15B is ultra vires and illegal also on the principles laid down by the Supreme Court in D. Cawasji & Co. v. State of Mysore [1985] 58 STC 1. He also submitted that in view of the facts stated in paragraph 9 of the said judgment and the principles laid down by the Supreme Court in the case of HMM Limited v. Administrator, Bangalore City Corporation [1990] 77 STC 17; (1989) 4 SCC 640 at 648 and 649, there is no question of passing on the so-called purchase tax to the consumers by the petitioners; and therefore, the amount collected by the respondents without any authority of law should be refunded to the petitioners with interest at 24 per cent per annum at which rate the respondents charge interest from the assessee under section 47(4A) of the Act.

18. Mr. Joshi, appearing for some of the petitioner supported the contentions of Mr. Pathak. He submitted, placing reliance on the objects and reasons for introducing old section 15B on the statute book, that the said provisions were meant to plug the loopholes which had resulted in escapement of payment of Central sales tax when the dealers manufacturing taxable goods in the State instead of entering into inter-State sale transactions in the State, resorted to dispatch of their goods outside for sale in other States through their branches located in other States. Therefore, essentially, the measure was meant to bring to tax such consignments going out of State and if that is so, such consignment tax would be clearly ultra vires the power of the State Legislature as ruled by the Supreme Court in Goodyear case [1990] 76 STC 71. Even though the said provision is substituted retrospectively by new provision of section 15B, the object of the said provision and its pith and substance would remain the same. That this becomes clearly highlighted once this provision is read with the statutory rule 42E and on a combined reading of both these provisions which are part and parcel of the same legislative scheme, the conclusion is inescapable that the impugned new Gujarat provision in substance seeks to levy tax on consignment and, therefore, is ultra vires the State legislation and that this aspect of the matter is squarely covered by the decision of the Supreme Court in Goodyear case [1990] 76 STC 71. Alternatively, Mr. Joshi submitted that even if it is held that taxing event is not consignment of taxable goods outside the State and even if it is held that rule 42E operates in a different field, even then, taxing event in the impugned provision would be, the use of purchased raw materials by manufacturer/dealer in manufacturing taxable goods and, therefore, levy would be one on manufacture. Consequently, it would be ultra vires entry 54 of the State List and would be covered by entry 84 of the Union List. In that connection, Mr. Joshi heavily relied on the decision of the Bombay High Court in Writ Petitions Nos. 477 of 1990 and group (Hindustan Lever Ltd. v. State of Maharashtra [1990] 79 STC 255). Analysing the new Gujarat provision of section 15B, Mr. Joshi submitted that it contemplates various contingencies when purchase of raw material simpliciter would not be covered by the said provision. In the following cases, even though raw materials are purchased in the State of Gujarat and are utilised for manufacture of taxable goods out of them, section 15B may not apply :

(i) Purchase by manufacturer/dealer of declared goods which are of national importance.

(ii) Purchase of raw materials which are for resale.

(iii) Purchase of raw materials which are used for manufacture of tax-free goods.

(iv) Purchase of tax-free goods.

(v) Purchase of raw materials which may be taxable goods outside Gujarat State and then their import in the Gujarat State.

19. Mr. Joshi submitted that in the old section also, this was the position. He further submitted that on proper analysis of the impugned provision, it becomes clear that the section operates in three stages (i) when raw materials which are taxable goods are purchased; (ii) they are used as raw or processing materials or consumable stores in the manufacture of other taxable goods and (iii) disposal of such finished products. Mr. Joshi submitted that it is early to visualise that any businessmen who is a manufacturer/dealer would not manufacture goods for nothing. He would manufacture for sale either within the State or beyond the State. If it is sale within the State, then in the light of rule 42E, purchase tax under the impugned provision would not be attracted. Even if it is inter-State sale, impugned provision would not be attracted. If they are exported out of the State, taxable event under the impugned provision would not be attracted and, therefore, what is left out is consignment of the manufactured goods outside the State and, therefore, in substance, the impugned provision seeks to impose consignment tax when read with rule 42E and consequently, it is liable to be struck down in the light of the ratio of the decision of the Supreme Court in Goodyear case [1990] 76 STC 71. Mr. Joshi also placed reliance on the decision of the Punjab and Haryana High Court in Bata India Limited v. State of Haryana [1983] 54 STC 226 and invited our attention to para 30 thereof at page 243 which dealt with advent of taxing event and submitted that this part of the ratio of the decision is fully approved by the Supreme Court in Goodyear case [1990] 76 STC

71. Placing strong reliance on the aforesaid decision, it was submitted that the impugned provision in the guise of imposing purchase tax, in pith and substance imposes a tax on consignment and is liable to be voided on the same ground on which the pari materia provision of the earlier Bombay provision was voided by the Supreme Court in Goodyear case [1990] 76 STC 71. Mr. Joshi alternatively contended that if not imposing consignment tax, the impugned provision does impose tax analogous to excise as it seeks to levy duty on manufacture of taxable foods out of raw materials or consumable stores which are produced by a dealer/ manufacturer in the State and to that extent Mr. Joshi heavily leaned on the decision of the Bombay High Court in Writ Petition No. 477 of 1990 and group (Hindustan Lever Ltd. v. State of Maharashtra [1990] 79 STC 255).

20. Mr. Kaji appearing for some of the petitioners also toed the line of the arguments of Messrs. Pathak and Joshi and further contended that established principles of interpretation would require that newly substituted provision of section 15B should be examined after considering what was the position before the Forty-sixth Amendment, find out what was the mischief that was sought to be remedied, discover true rational for the remedy, the true ratio of the Supreme Court decision in Goodyear case [1990] 76 STC 71 and the scheme of the new legislation comprised in section 15b and rule 42E which are part and parcel of a single integrated scheme. He submitted that while considering the legislative competence of the State Legislature to enact section 15B, the court must look not to the form but to the substance of the levy and, therefore, the nomenclature given by the Legislature is not decisive. He submitted that in the light of the above position, the impugned new Gujarat provision of section 15B read with rule 42E is liable to be struck down as it is a mere device or an attempt to get over the ratio of the Supreme Court decision in Goodyear case [1990] 76 STC 71 and is a colourable legislation the pith and substance of which is levy of tax on despatch or consignment which is beyond the legislative competence of the State Legislature by virtue of entry 92B of List I of the Constitution. In this connection, strong reliance was placed by Mr. Kaji on the decision in Goodyear case [1990] 76 STC 71 and also on the decision of the West Bengal Taxation Tribunal in RN Nos. 10 and 283 and group decided on 11th September 1990 [Reported as Rasoi Limited v. State of West Bengal [1991] 80 STC 356 (WBTT)]. As per the said decision, the West Bengal Taxation Tribunal voided the provisions of sections 4(6)(ii), 5(7)(iii) and sub-section (2A) and 2(B) of section 26A of the Bengal Finance (Sales Tax) Act, 1941 and the provisions of section 4(2)(i) and 4(2)(iia) and 28 of the West Bengal Sales Tax Act, 1954, as amended by the West Bengal Taxation Laws (Amendment) Act, 1990. The said Tribunal taking a clue from the decision of the Supreme Court in Goodyear case [1990] 76 STC 71, held that these impugned provisions constituted a composite scheme and sought to levy consignment tax and therefore, were beyond the legislative competence of the State Legislature and entry 54 of the State List. He also placed reliance on the decision of the Supreme Court in the case of J.K. Steel Ltd., v. Union of India AIR 1970 SC 1173 wherein Hegde, J., though in minority on other points, made observations in para 30 of the report which were not disapproved by the majority. He also placed reliance on the decision in Kailash Nath v. State of U.P. [1957] 8 STC 358 (SC); AIR 1957 SC 790 and submitted that rule and section must be read together to cull out the real legislative intention and pith and substance of the provision.

21. It was alternatively contended that assuming that impact of rule 42E cannot be taken into account while considering the validity of section 15B, even then, the ratio of the decision of the Supreme Court in Goodyear case [1990] 76 STC 71 as to what is the taxable event, governs the present case. Applying the said ratio, the taxable event is not the original purchase of raw material but it is its subsequent use in the manufacture of taxable goods. Two stages envisaged by section 15B are : (i) purchase of raw materials and (ii) use of such raw materials in the manufacture of taxable goods. To paraphrase the second stage, it is manufacture of taxable goods by use of such materials. In other words, taxable event or the chargeable event on the ratio of the Supreme Court decision is the manufacture of taxable goods by use of such raw materials. He submitted, taking as clue from the decision of the Supreme Court, that in the present case, chargeable event is not purchase of raw material by a dealer in the State but is occurs when subsequent condition of use of purchased material in the manufacture of taxable goods takes place and it would be the said subsequent condition occurrence of which would attract the charge and is to be treated as taxable event. He submitted that such manufacture of taxable goods out of purchased raw material if brought to tax would amount to tax on manufacture and would be analogous to the taxing measure covered by entry 84 of the Union List and in no case can be covered by entry 54 of the State List. He submitted that taxable event so far as the impugned provision is concerned, is the manufacture of taxable goods by which time the raw materials have already merged in the taxable goods and different articles have come into being. The nexus, therefore, between the levy thus interpreted or analysed is too remote from the purchase of raw materials. It cannot be construed as a mere postponement of the levy on purchase of raw materials. It was next contended that under the Gujarat Sales Tax Act, there is no general levy of purchase tax and a dealer is not liable to pay purchase tax to the State except under sections 15, 15A and 16 in certain eventualities mentioned therein. Therefore, section 15B imposes a net levy and is not an additional purchase tax though styled as such. In this connection, reliance was placed on the decision of the Bombay High Court in Commissioner of Sales Tax v. N. L. Mehta [1986] 61 STC 362 and it was submitted that purchase tax would become payable only when goods are manufactured out of purchased raw materials and till that event happens, no levy arises and consequently, the levy must be treated to be analogous to excise.

22. It was alternatively contended by Mr. Kaji that even apart from rule 42E, levy can also be construed as an impost on the used of raw materials and not its purchase. Therefore, in substance, levy would be levy on user of purchased raw materials and such levy is not covered by entry 54 of the State List. State Legislature has no power to levy any tax on the use or consumption of goods except under entry 53 of List II which deals with electricity. The power to tax such use exclusively vests in the Parliament which may either by way of levy of excise under entry 84 or levy on use under entry 97 which is residuary entry in the Union List. He next submitted that curiously enough, there is no validating provision in the Amendment Act substituting section 15B. The old section 15B is clearly beyond the legislative competence of the State Legislature as on that basis, it has been repealed with retrospective effect by the impugned provision. That there is no fiction introduced by the Ordinance or the Act that actions taken or assessments made under the old section 15B are now deemed to have been made under new section 15B. The limited fiction introduced by section 4(2) of the Amending Act states that though the Ordinance is repealed, any act done under the Act as amended by the Ordinance shall be deemed to have been done under the Principal Act as amended by the Amendment Act. Therefore, the only actions carried out after the Ordinance and before the enactment of the Amendment Act would be covered by the fiction at the highest. It was, therefore, submitted that all actions taken and all taxes paid and all assessments made under the old section 15B are null and void and are not saved by mere enactment of a retrospective section.

23. It was lastly submitted that the newly substituted section 15B in any case is unreasonable and violates article 14 of the Constitution as it seeks to rope in all manufacturers big and small who purchase the raw materials in the State and use them in manufacturing taxable goods out of them. Remedy cannot be worse than the disease. The impugned provisions if considered de hors rule 42E would make them per se unreasonable.

24. Mr. Kaji produced on record xerox copies of the relevant provisions of the Calcutta sales tax laws which were dealt with by the Calcutta Tribunal.

25. Mr. S. N. Shelat appearing for the petitioners in Spl. C.A. No. 8690 of 1990 adopted the arguments of Messrs. Pathak, Joshi and Kaji and submitted that when the relevant provisions of the Act and the Rules are read together, it becomes clear that the impugned provision imposes tax on consignment. In order to support his contention that the statutory Rules are part of the Act and represents a composite scheme, he placed reliance on a decision of the Supreme Court in Tata Engineering & Locomotive Co. Ltd. v. Gram Panchayat AIR 1976 SC 2463 and Collector of Central Excise v. Parle Exports (P.) Ltd. [1989] 75 STC 105; AIR 1989 SC 644 and a decision of the Division Bench of this Court in I.C.G. Textile Industry v. S.M. Corporation (1984) 25 GLR 197. He also invited our attention to page 54 of the rejoinder affidavit and submitted that during the time old section 15B was on the statute book, the petitioner-company had paid almost similar amount of purchase tax as was paid by it even after the new impugned Gujarat provision was inserted by the Ordinance and the Act and consequently, it can be visualised that the scope and ambit of the impugned new Gujarat provision are the same as that of the earlier provision. Mr. Shelat next submitted, placing reliance on the decision of the Supreme Court in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh [1980] 45 STC 36; AIR 1980 SC 286 especially paras 21, 25 and 53 of the report (at pages 43, 44 and 52 of STC) that levy of sales tax is different from levy of excise and if special features of the sale tax are not available, then levy would remain in any case a levy of excise. He also invited our attention to section 13 of the Gujarat Sales Tax Act and especially clause (1A)(i) thereof and submitted that in cases covered by this provision, the certificate which is to be issued by a dealer is about purchase for resale while in the present case, purchase of the raw materials is not for resale but raw materials are used in the manufacture of taxable goods. Such requirement would not be covered by the permissible limits of imposition of sales tax by the State Legislature.

26. Mr. G. H. Bhatt appearing for petitioners in Special Civil Applications Nos. 8696 of 1990, 8705 of 1990 and 8455 of 1990 submitted placing reliance upon recent assessment orders passed against the petitioners, that under the impugned new Gujarat provision, purchase tax is levied on goods sent out of State branches and that would remain on the domain of consignment tax. He also invited our attention to the decision of the Federal Court In re Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 [1938] 1 STC 1 (FC); AIR 1939 FC 1, and which is considered by the Supreme Court in Goodyear's case [1990] 76 STC 71 to indicate the nature of State legislative power to impose tax on sales and purchases vis-a-vis powers of the Central Legislature to impose tax of excise. Mr. Bhatt's contention was that the impugned new Gujarat provision seeks to levy, in substance, tax on consignment or alternatively it is tax in the nature of excise.

27. The learned Advocate-General in reply to the various contentions of the learned advocates of the petitioners, at the outset took us to the Constitution scheme envisaged by articles 245, 246, 248 and 254 of the Constitution and the relevant entries in Lists I and II of the Seventh Schedule to the Constitution. He also invited our attention to the Constitution amendment Acts being Sixth Amendment and Forty-sixth Amendment Acts. He submitted that the sales tax on inter-State sales by virtue of the aforesaid Sixth Amendment was confined to legislative powers of the Parliament and that by Forty-sixth Amendment, tax on consignment of goods outside State was also brought within the domain of the legislative powers of the Parliament. He also took us to the consequential amendments made by the aforesaid Constitution Amendment Acts to articles 269, 286 and 366 of the Constitution. He then submitted that under the Government of India Act, 1935, there were only two Lists in the Seventh Schedule and as per the Seventh Schedule, List II under entry 48, taxes on sale of goods and on advertisement could be imposed by the Provincial Legislature. They were taxes on sale only. That power to tax purchases was conferred on the State Legislature by entry 54 of the Indian Constitution. He also took us to the relevant provisions of the Gujarat Sales Tax Act especially definition provision and sections 3, 3A, 4A, 5 and 6 and submitted that charging section is section 6 while section 6 merely deals with mode of payment and is not a charging section. That the rules referred to therein regulate the amount of payment of tax by dealers liable to pay tax and who are charged to tax under other provisions. That liability to pay sales tax or purchase tax as the case may be, does not flow from section 6, section 6 deals with the method and manner of payment of tax due by them under other provisions of the Act. In this connection, our attention was invited to sections 49 and 50 of the Act and it was submitted that they deal with exemption from payment of tax, liability for which has arisen under other provisions of the Act. There provisions do not deal with charging event at all, but they only deal with mode of payment once charging event has taken place. Therefore, it cannot be said that charging event is uncertain so far as the impugned provision is concerned. He invited our attention to the legislative history of the impugned provision. By Gujarat Act 17 of 1986 which came into effect from 1st April, 1986, section 15B and 15C were inserted. By Gujarat Act 16 of 1987, which came into effect from 1st April, 1987, section 15C was deleted and new section 15B was inserted in a composite form which held the field till it was repealed by the Ordinance. The learned Advocate-General submitted in connection with the decision of the Supreme Court in Goodyear case [1990] 76 STC 71 that the Supreme Court was concerned with the catch word "despatch" as employed in the impugned Punjab and Haryana and Maharashtra provisions and, there-fore, according to him, the observations of the Supreme Court in connection with taxing event will have to be construed in the light of that aspect of the matter. So far as the present provision is concerned, it was submitted that in pith and substance, the provision imposes purchase tax on raw materials which are used in manufacture of taxable goods. That user is in the manufacture and not for manufacture and consequently, the said provision does not impose any excise tax. Manufacture of taxable goods is not the event but user of raw material in manufacture is relevant for the present purpose. Special emphasis was placed on the observations of the Supreme Court at page 95 wherein it was mentioned that purchase of goods and their use were descriptive terms for identification of the goods and, therefore, user of the raw material would not bring about taxing event. So far as Goodyear case [1990] 76 STC 71 is concerned, the pith and substance of the impugned provision before the Supreme Court was tax on consignment of manufactured goods. So far as the judgment in [1990] 79 STC 255 (Hindustan Lever Ltd. v. State of Maharashtra) was concerned, it was submitted that it was partly right when it held that new Maharashtra provision was not imposing any consignment tax but it was wrong when it was held that it imposes tax like excise tax. It was submitted that rule 42E can exist independent of the impugned provision and, therefore it cannot be treated to be integral part of the provision. The provision has to be examined on its own merits. The learned Advocate-General then took us to the decision of the Supreme Court in State of Tamil Nadu v. Kandaswami [1975] 36 STC 191 and two Kerala decisions in [1992] 30 STC 537 (Malabar Fruit Products Company v. Sales Tax Officer) and [1973] 32 STC 359 (Yusuf Shabeer v. State of Kerala) and submitted that as the term "despatch" is absent in the impugned provision, the question of applicability of entry 92B in the First List of the Seventh Schedule does not remain to be considered in the present case. Such was not the situation before the Supreme Court in Goodyear case [1990] 76 STC 71. There, entry 92B directly stared in the face. Therefore, when the said entry is out of picture, all that is to be considered is whether in pith and substance, the impugned provision is covered by entry 54 of the State List. So far as this is concerned [1975] 36 STC 191 (State of Tamil Nadu v. Kandaswami) and two decisions of the Kerala High Court would get squarely attracted.

28. Turning to the impugned provision, he submitted that even though the word "then" is used, it only indicates how to identify the goods liable to purchase tax under the said provision, and it does not defer occurrence of the taxing event to the actual user of the purchased raw material in the manufacture of taxable goods. That imposition of tax is on purchase of raw material while levy of tax is deferred till goods are identified with the description mentioned in the section. He submitted that user of the purchased raw material in the manufacture of taxable goods is not a condition for levy of purchase tax.

29. Placing reliance on the Constitution Beach judgment of the Supreme Court in [1968] 21 STC 212 (Andhra Sugars Ltd. v. State of Andhra Pradesh) the learned Advocate-General submitted that purchase of raw material for use in manufacture of any commodity can be validly taxed by the State Legislature by imposing purchase tax and that in the present case, the Ordinance sought to do so but as mere intention to use such raw material in the manufacture of goods though actually not backed up by such use would have affected the "levy", the State in its wisdom thought to reduce the extent of coverage of such levy and for that purpose, made necessary changes in the Act. However because of such change, the nature of the tax is not the least affected and would remain in pith and substance, a purchase tax on raw material and would be within the competence of the State Legislature as per entry 54 of the State List.

30. The learned Advocate-General next contended that as the impugned provision does not seek to levy any tax on despatch or consignment, the ratio of Goodyear's [1990] 76 STC 71 judgment of the Supreme Court will not apply and that to that extent, the Bombay judgment is correct. However, the Calcutta view reflected by the decision of the Tribunal cannot be applied to the facts of the present case as in Calcutta legislation, the provision for refund was part and parcel of the same statutory scheme and under these circumstances, the Tribunal held that levy was by way of tax on consignment while this is not the position here as rule 42E may be read with the section, still it is not at all integral part of the section and the section can exist independent of the rule. It was submitted that even otherwise, the view of the Calcutta Tribunal is not correct and the view of the Bombay High Court to the contrary on this point is more acceptable.

31. He next submitted that there is no question of levying any excise tax or tax in the nature of excise as the manufactured articles are not subjectable to levy of tax.

32. So far as user's tax is concerned, he submitted that in pith and sub-stance, section 15B imposes a purchase tax and not tax on user of purchased raw material. In order to become user's tax, levy must be on user primarily. This is not the case here. He relied upon Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 (SC) in this connection and submitted that the goods required for use and goods purchased and used would stand on the same footing and if purchase tax on goods required for use has been held to be within the State legislative power by the Supreme Court on the same reasoning, the present tax can be upheld.

33. Relying on Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 (SC) at page 95, 111 and 114, it was submitted that the taxable event is the purchase of raw material and use of raw material referred to in the section seeks to describe the goods purchased and nothing more.

34. It was further contended by the learned Advocate-General that to be user's tax simpliciter, the legislation must aim at taxing user of the goods directly and the earlier purchase of the goods would not become directly relevant. In other words, for user tax the main target of legislation is the user of the goods and how the goods were purchased earlier would remain only a historical fact while in purchase tax, main target is the transaction of purchase for the purpose of tax, and the user of purchased commodity merely describes the goods to be made subject-matter of target. In this connection, reliance was placed on the decision of the Supreme Court in Goodyear case [1990] 76 STC 71 especially at page 114 where Ranganathan, J., laid down the relevant connotation of the taxing event in such cases. Relying on the aforesaid observations, it was submitted that in Goodyear case [1990] 76 STC 71, tax actually become effective on a different class of goods despatched out of State and the said event was unrelated to the prior purchase of inputs which had resulted in the dispatched goods while in the present case, the situation was different. The taxing event was purchase of raw material as this was directly related to the user of these goods and it was that purchased commodity which remained the same and which suffered tax burden on its use in manufacturing other taxable goods.

35. The learned Advocate-General next contended that the impugned provision cannot be said to be imposing consignment tax as there is no despatch of the goods manufactured out of raw materials outside the State. It is not excise duty or analogous to excise as it does not impose any tax burden on the manufactured article out of raw materials. He next contended that it is not user tax as it is not directly related to user but it is directly related to purchase of raw materials and subsequent description of the goods would not extend its taxing event and that totally a new commodity is not being taxed.

36. Alternatively, it was contended by the learned Advocate-General that even assuming that there was some trenching on the residuary power of the Parliament under entry 97 of List I, it was incidental and marginal trenching. In pith and substance, the legislation was imposing purchase tax on raw material and if incidentally, its user was taxed, it was a peripheral exercise and such incidental trenching on entry 97 would not impinge upon the legislative competence of the State under entry 54 to enact such legislation. Reliance was placed in this connection in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh [1980] 45 STC 36 (SC); AIR 1980 SC 286 and also on State of Karnataka v. Ranganathan Reddy AIR 1978 SC 215.

37. Replying to Mr. Kaji's contentions, the learned Advocate-General submitted that rule 42E cannot be read to nullify section 15B. That levy is under section 15B. Rule 42E is concerned with assessment of purchase tax and is dealing with process of collection, that refund on tax paid while fixing up assessment has nothing to do with levy of charge. That section 15B and rule 42E can exist separately and independently. Even if rule 42E is repealed, section 15B can stand on its own. All that would happen is that its coverage would increase. Reliance was also placed on marginal note of section 6 which deals with a dealer liable to pay tax. It was, therefore, contended that liability is covered by other sections like section 3. Section 6 is merely a machinery section and it regulates payment of tax charged under other provisions and cannot be said to be a charging section.

38. The learned Advocate-General next contended that by enactment of new section 15B, the Gujarat Legislature has not tried to nullify the ratio of the decision of the Supreme Court in Goodyear case [1990] 76 STC 71. On the contrary, in exercise of its plenary powers under entry 54 of the State List, a new purchase tax simpliciter has been imposed and it has nothing to do with earlier consignment tax which was sought to be repealed under the repealing provision.

39. He next referred to Mr. Kaji's contention that there is no validating provision found in section 15B which is newly enacted. He submitted that no action taken under old section 15B has been invalidated by any court nor any judgment or order of court is displaced by the said section. This is a case of simpliciter repeal of old section 15B and its substitution with retrospective effect by new provision. Under these circumstances, there is no occasion for Legislature to validate the past transactions or orders under the old provision. That all other assessments made under the then existing section 15B will have to be treated to be those under the new section 15B which is substituted by retrospective effect from 1st April, 1986. The effect of such retrospective legislation is as if new provision of section 15B is written by the same pen and ink in the Act as if from the beginning. If new section 15B is valid, all past actions, assessments and orders would be governed by the new provision and would be valid. He next contended that manufacture of taxable goods as mentioned in section 15B would mean goods which are generally taxable under the Act. In this connection, reliance was placed on the decision of the Supreme Court in State of Tamil Nadu v. Kandaswami [1975] 36 STC

191. It was submitted that taxing event under the section does not depend upon actual and complete user of the raw material purchased but their mere use in the manufacture of generally taxable goods would be sufficient to attract taxable event. It is not as if taxable goods must necessarily, emerge, they may not emerge for diverse reasons. Still, once raw materials are used in the manufacturing process, taxable event is complete. Placing reliance on the definition of "taxable goods" in section 2(33) and definition of "goods" in section 2(12) as well as definition of "turnover of sales" under section 2(36) and "turnover of purchases" in section 2(35), it was submitted that the dealer who is manufacturing taxable goods and for that purpose purchasing raw material in the State does know for which manufacturing process he is purchasing the raw material. The goods which are exempted from payment of tax under section 5 and 49(1) are clearly indicated in the Act and the Schedules. The goods which are exempted by notification under section 49(2) can also be specified at a later stage when they may earn exemption and refund from payment of purchase tax if they are covered by the notification. But this has nothing to do with charging event under section 15B which taxes place the moment purchased raw materials are used in manufacturing process which may ultimately result in manufacturing of taxable goods. He submitted that section 49 deals with total or partial exemption from payment of tax but the goods otherwise would generally remain taxable. Referring to the contention regarding excise, it was submitted that tax under section 15B is not affixed by ingredient of manufacture. That section has nothing to do with manufacture of final product. It is concerned with inputs which are purchased and which are used in manufacturing process. That is certainly not excise. That Goodyear judgment [1990] 76 STC 71 (SC) dealt with a situation which attracted Forty-sixth Constitution amendment and its scheme. Such is not the position here. That the present position is analogous to one which was examined by the Kerala judgments dealing with a similar legislation.

40. The learned Advocate-General thereafter emphasised the concept of incidental trenching and placed reliance in this connection on the decision in Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 at page 113 para 6, page 116 para 9 and page 120 last para. He also read the observations of Ranganathan, J., at page 132 and paras 6 and 8 at page 135. Dealing with the West Bengal Act and the Tribunal's judgment, the learned Advocate-General submitted that West Bengal legislation enacted charging section itself being hedged in by the provision of refund and, therefore these provisions were considered to be integral part of the same legislative scheme. Charge and exemption were part and parcel of the same enactment and therefore, they were to be considered together. Such is not the position in the present case. We have separate rule without which charging provision can exist. In fact, the Calcutta Tribunal itself has held that but for the exemption provision, the main provision would have been within the legislative competence and would have fallen within entry 54 as raw materials were purchased for use in manufacturing process.

41. Mr. Kaji in rejoinder submitted that Goodyear judgment [1990] 76 STC 71 (SC) is Bible or Quran and lays down the ration about correct connotation of the term "taxable event" and that for deciding the same, three aspects of the matter have to be kept in view : (a) form and substance of rule, (2) pith and substance of the provision and (3) previous legislative history. In the present case, rule 42E when read with section 15B clearly indicates legislative intention of re-enacting consignment tax camouflaged as purchase tax. He questioned that no statutory rule can be ignored while interpreting the section. He referred to decisions of the Supreme Court in J.K. Steel Ltd. v. Union of India AIR 1970 SC 1173, Tata Engineering & Locomotive Co. Ltd. v. Gram Panchayat AIR 1976 SC 2463 and Collector of Central Excise v. Parle Exports (P.) Ltd. [1989] 75 STC 105 (SC); AIR 1989 SC 644 in this connection and submitted that contemporaneous exposition of legislative intention flowing from the statutory rule cannot be ignored and the rule is to be treated as part of the Act especially when this rule 42E was enacted prior to section. Once again emphasising the ratio of the decision of the Supreme Court in Goodyear case [1990] 76 STC 71, it was submitted that tax is tax on sale and cannot refer to any earlier taxable event or later taxable event if it is to be genuine tax on sale. He further submitted that if taxable event depends upon subsequent condition, it is that condition which attracts the charge and there is no question of that charge being dormant charge till then. That use of purchased raw material is not qualification for purchase. It is independent event. That goods lose identity while they are used in manufacturing process. Same was the case in Goodyear case [1990] 76 STC 71. He, therefore, submitted that this is tax on consignment.

42 .Alternatively, it was submitted by him that section, imposed tax on manufacture of taxable goods. On a proper reading of the section it would mean that if a dealer purchases raw materials and manufactures taxable goods by use of these raw materials, taxable event takes place. Placing strong reliance on the Bench decision of the Bombay High Court in Commissioner of Sales Tax v. N. L. Mehta [1986] 61 STC 362, is was submitted that it is not use simpliciter which attracts charge. But it is use in manufacturing of taxable goods which attracts charge. Simply putting to use will not attract charge. Placing reliance on a decision of this Court in Nowroji N. Vakil & Co. v. State of Gujarat [1979] 43 STC 238 as confirmed by the Supreme Court in [1981] 47 STC 376 (Hindustan Brown Boveri Ltd. v. State of Gujarat), it was submitted that taxable goods cannot be identified till final products emerge. That liability to pay will not arise till then. He further submitted that intention to use and purchase of raw material may be simultaneous, as in [1968] 21 STC 212 (SC) case (Andhra Sugars Ltd. v. State of Andhra Pradesh), but purchase of raw material and their use cannot be simultaneous. Placing reliance on a decision of the Supreme Court in Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430; AIR 1967 SC 1895, it was submitted that if purchase of raw material is for use, no question of excise would arise. But such is not the present case. In this connection, reliance was placed on the case in Jiyajeerao Cotton Mills Ltd. v. State of Madhya Pradesh AIR 1963 SC 414, para 6. He submitted that after manufacture of electricity when tax is levied at the stage of its user or consumption, it would be user tax, permissible under entry 53 of the State List. It was submitted that in the present case, even assuming that section does not impose excise duty, in any case, it imposes user tax which is not within the legislative competence of the State Legislature.

43. Mr. Shelat for some of the petitioner supported the arguments of Mr. Kaji and submitted that in the present case, unlike the decision of the Supreme Court in AIR 1980 SC 286; [1980] 45 STC 36 (Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh) (para 53 at page 298 of AIR; at page 52 of STC) taxable event is not only the purchase of raw material but purchase and their subsequent use and, therefore, the section in substance in any case imposes duty in the nature of user tax which is beyond the legislative competence of the State Legislature.

44. Mr. Joshi in rejoinder submitted that under section 86 and 87 of the Act, there is clear distribution of powers between the Union and the State as in article 246(3) and that rules framed under section 86 are for the purpose of the Act and, therefore, they have to be read alongwith the relevant provisions of the Act. In this connection, our attention was invited by the learned advocate to a decision of the Supreme Court in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1963] 48 ITR 83 for submitting that the rules framed under the Act have to be read along with the section for bringing out the correct meaning of the provisions of the section. That as section 15A cannot be worked without rule, similar section 15B also cannot be construed without rule. Emphasis was placed on the observations of the Supreme Court in Goodyear case [1990] 76 STC 71. Mr. Kaji at this Stage relying upon the Bombay judgment in Hindustan Lever Ltd. v. State of Maharashtra [1990] 79 STC 255 at 264, submitted that the word "then" used in section 13AA of the Maharashtra Act and similar words used in Section 15B in the present case cannot be ignored and it shows that taxing event takes place only at the stage where the situation contemplated by the term "then" is reached.

45. Mr. Pathak in rejoinder submitted that section 15B in substance imposes tax on manufacture of taxable goods and unless taxable goods are manufacture, taxable event does not take place. Therefore, this provision encroaches upon the Parliament's power under entry 84 of the Union List. Mr. Pathak next contended that section 15B is charging section so far as additional purchase tax is concerned and it has to be construed strictly. If the word "and" used in the section is a condition for attracting levy, placing reliance on [1990] 76 STC 71 (Goodyear India Ltd. v. State of Haryana) at page 95, it was submitted that it is the last condition which attracts taxable event and the earlier stages contemplated by the section can be treated as description of goods. But, in the present case, if according to the learned Advocate-General, taxing event takes place at the time of purchasing of raw material, then subsequent event cannot be considered to be description of the goods which have already suffered charge. He submitted that it is really effect use of the purchased raw material in manufacture of taxable goods that attracts levy. He submitted that the word "then" cannot be read as "if" in the section. Manufacturing process must be complete before it can be said that purchased raw material was used in the manufacture of concerned taxable gods. Referring to [1975] 36 STC 191 (SC) Kandaswami case, it was submitted that in that case, there was no definition of words "taxable goods". Therefore, the Supreme Court treated them as generally taxable. But we are concerned with the definition in section 2(33) of "taxable goods" and that definition has to be given its effect. Mr. Pathak also placed reliance upon the decision of the Supreme Court in [1981] 47 STC 376 (Hindustan Brown Boveri Ltd. v. State of Gujarat) and this Court in [1979] 43 STC 238 (Nowroji N. Vakil & Co. v. State of Gujarat) in this connection. He also invited our attention to entry 118 in the notification issued under section 49(2) relating to industries in backward area and submitted that till the contingency contemplated by the said provision takes place it would not be possible to arrive at any definite taxable event. He also took us to item No. 6 in Schedule I of the Act under section 5 and stated that as conditional exemption is given to manufactured goods till these conditions are satisfied, it would not be possible to decide whether taxable goods have emerged or not. That mere user of purchased raw material in manufacturing process would not be a taxable event. Therefore, the provision in substance would be that of excise. Placing reliance on a decision in Commissioner of Income-tax v. Smt. Minal Rameshchandra [1987] 66 STC 294 at 313, it was submitted that ratio of the judgment would be only legal principles which can be culled out on the universal application and not the facts of the case or decision rendered by applying the ratio to the facts. He also relied upon the decision in Syed Mohammad & Co. v. State of Andhra [1954] 5 STC 108 and submitted that the term "sale" in entry 54 would necessarily include purchase even when it is not specifically mentioned and, therefore, the scheme of 1935 Governments of India Act is in no ways different from the scheme envisaged by entry 54 of the List II under the Constitution. He then turned to section 6 of the Act and submitted that this, in his view, is charging section and for that proposition, he placed reliance on the observations of the Supreme Court in [1975] 36 STC 191 (State of Tamil Nadu v. Kandaswami).

46. Mr. Pathak submitted that section 6 is a charging section and, therefore, charge created by section 15B will have to be read in the light of the rules. He also invited our attention to section 51 regarding drawback, refund, etc. and section 55 dealing with remission of tax. Relying on Khandige Sham Bhat v. Agricultural Income-tax Officer [1963] 48 ITR 21 (SC), it was submitted that here phraseology of the section is not to be seen while judging its constitutionality but the effect of the provision is to be seen.

47. He also submitted that if rule 42E is not to be given effect to while fixing the assessment of tax, then, taxing provision of section 15b would be violative of articles 301 and 300A of the Constitution as it would be imposing a heavy burden on the tax-payer and the Gujarat industries will be treated in a discriminatory manner as compared to industries outside the State.

48. The learned Advocate-general in sur-rejoinder submitted that the subordinate legislative function entrusted to the State authorities under section 86 cannot be equated with paramount legislative power of the Legislature. In this connection, he invited our attention to section 20 of the Bombay General Clauses Act, 1904 and referred to the decision in Thakar v. Bhatia (1971) 12 GLR 397 especially para 5 thereof wherein it is held that notification does not become part of the statute itself.

49. Referring to Goodyear case [1991] 76 STC 71 (SC), it was submitted that ratio of that decision is to be seen in the light of 46th Amendment and entry 92b in the Union List. The observations of the Supreme Court had to be read in that light. The learned Advocate-General then posed a question whether it is permissible to read down the statutory provision in the light of rule with a view to making statutory provision incompetent. He stated that such exercise is not permissible at all. It was submitted that while judging the legislative competence of the provision, there was no question of interpreting the provision or reading it down, in the light of any statutory rule.

50. The learned Advocate-General then took us to the observations of the Supreme Court at page 111 of Goodyear case [1991] 76 STC 71 judgment and submitted that reasoning on that page to the effect that charge under section could be treated to be dormant or not has to be read in the light of the entry 92B of the Union List and the nature of the provision which fell for consideration of the Supreme Court. That the present provision is not of that type.

51. Interpreting the present provision, it was submitted that the word "then" is adverb and it adverts to time or contingency, meaning thereby, it would mean at that time or in that case. In the context of the provision, it would really mean "in that case" and would show that this phrase deals with description of goods brought to tax under the section and to that effect, the observations of the Goodyear case [1990] 76 STC 71 (SC) at page 95 were pressed in service. That the word "and" is used indicating the description of goods. [1986] 61 STC 362 (Commissioner of Sales Tax v. N. L. Mehta), which was a Bombay Division Beach judgment was distinguished on the ground that the court in that case was concerned with section 13 of the Bombay Act which had different phraseology, viz., "purchasing raw material and using them in manufactured goods". There, emphasis was placed on "manufacture of taxable goods". In the present case, the phraseology is different and the section states - "purchases goods and uses them as raw material in manufacture of goods". Hence, the moment such user is made of the purchased raw material, charge gets settled. Referring to the argument about validation provision, our attention was invited to section 9 of the Bombay General Clauses Act and the decisions of the Supreme Court in Maharashtra State Textile corporation Ltd. v. Official Liquidator AIR 1978 Sc 476 (para 12) for submitting that once retrospective enactment is made, old provision is to be treated to be non est and the new provision is deemed to be there from the very beginning and the assessment made and action taken have to be treated to be referring to new provision. This would be the logical effect of the deeming fiction of retrospective provision which has to be fully implemented. It was further submitted that though rule 42E may not be retrospective in all cases, where past assessments are made, tax liability would be worked out in a proper manner in the light of new provision and if remission is to be given, that would be given by the Commissioner in exercise of his powers under section 55 of the Act, with the result that tax liability which is to be worked out in the light of section 15B and rule 42E would be worked out for all similarly situated assessees even for their past assessments but no occasion would arise for refunding any amount to the assessees only because old assessments under old provision have resulted into payment of tax as such payments can be supported by new provision and rule 42E and if at all, question of further recovery under old assessments would arise if new section 15B is applied to them de hors rule 42E. But such an eventuality may not arise because the Commissioner will exercise power under section 55 in such cases so that old assessees and new assessees alike will be treated at par in the light of the impact of tax as per section 15B read with rule 42E.

52. IV. Points for determination : In the light of the aforesaid rival contentions, the following points arise for our determination :

(1) Whether the impugned new provision of section 15B of the Gujarat Sales Tax Act, 1969, is within the legislative competence of the State Legislature ?

(2) If not, to what reliefs are the petitioners entitled to ?

(3) If the impugned provision is within the legislative competence, whether the validating provision of section 4(2) of the Gujarat Sales Tax (Amendment) Act, 1990, can sustain all actions taken and all taxes paid and all assessments made under old section 15B which is replaced by the impugned new Gujarat provision and whether even independently of the said section 4(2), the aforesaid actions can be sustained ?

(4) If the answer to point No. 3 is in the negative, to what reliefs are the petitioners entitled to ?

V. Discussion on points for determination :

(1) Legislative competence for enacting section 15B :

This is the main contention which has fallen for consideration in the present proceedings. The rival contentions of learned advocates of parties have projected the following controversies underlying this question :

(a) Whether section 15B in substance imposes a consignment tax;

(b) Whether it imposes a tax in the nature of excise;

(c) whether it imposes user tax.

Questions (b) and (c) are raised in the alternative to question (a). If all these three questions are answered in the negative, then only, the impugned levy can be sustained under entry 54 of the State List as purchase tax. But if any of the three questions gets answered in the affirmative, then obviously levy would fail as it would go beyond the scope of entry 54 of the State List. It would, therefore, be profitable to deal with all these questions seriatim.

Question v(1)(a) : Whether section 15B imposes tax on consignment ? Before taking up for discussion this aspect of the matter, it is necessary to keep in view the relevant constitutional framework in the background of which the Supreme Court in Goodyear case [1990] 76 STC 71, while interpreting the impugned provisions before them, held them to be beyond the scope of entry 54 of the State List by treating them as imposing consignment tax covered by entry 92B of the Union List. We have already referred to these relevant statutory and constitutional provisions in Part II of this judgment. To recapitulate, it may be stated that before the Forty-sixth Amendment to the Constitution, even though the State Legislatures had power to impose tax on sale and purchase of goods in the State and even though inter-State sales could be brought within the network of Parliament's legislative power under entry 92A of the Union List, which referred to taxes on sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce, by device of tax planning, the manufacturers in the State who used to purchase raw materials and utilised them in manufacture of goods, used to consign such manufactured goods by despatching them outside the State to there branches. Therefore, it could not be said that they had entered into any transaction of inter-State sale. Mere consignment of the manufactured goods by its owner to his own branches outside the State would obviously be not inter-State sale, which can be taxed by the Parliament by enacting appropriate provisions under entry 92A. Such consignment also could not be brought to tax within the State as there was no sale of such manufactured articles within the State. Consequently, they remained untaxed. To plug this loophole, by the Forty-sixth Constitutional Amendment, entry 92B was inserted in the Union List to clothe the Parliament with the power to tax such consignments outside the State. When the Parliament was clothed with such power to tax consignments, the moot question would naturally arise whether the State Legislature could enter upon this forbidden field and under the guise of purchase tax on raw materials which had ultimately culminated into finished manufactured products which were then consigned to outside branches by the manufacturer/dealer in the State, could bring to tax such consignment. The answer would obviously be in the negative and such provision could not be sustained under entry 54 of the State List as such provision would be taxing provision exclusively in the competence of the Parliament under entry 92B of the Union List. This is precisely which is ruled by the Supreme Court in [1990] 76 STC 71 (Goodyear India Ltd. v. State of Haryana). This judgment requires a very close scrutiny as it has been the prime basis of the arguments of the learned advocates for the petitioners when they attacked the impugned provision of section 15B on the ground that it was beyond the legislative competence of the State Legislature as it sought to impose consignment tax and in any case, in the light of the judicial dictionary of taxing event as laid down in the said decision, the impugned levy cannot be sustained within the ambit of entry 54 of he State List. It has to be kept in view that the Supreme Court Bench consisting of Sabyasachi Mukharji (as he then was) and S. Ranganathan, JJ., in the aforesaid decision was concerned with the legislative competence of section 9 of the Haryana General Sales Tax Act which sought to levy purchase tax from a dealer who purchased goods other than those specified in Schedule B from any source in the State and used them in the State in the manufacture of any other goods and either disposed of the manufactured goods in any manner otherwise than by sale in the State or dispatched them to a place outside the State in any manner otherwise than by sale in the course of inter-State trade or commerce or in the course of export outside the territory of India. In that decision, the Supreme Court was also concerned with pari materia provision of the Maharashtra Act, section 13AA, which is already reproduced by us earlier in Part II of this judgment, In Maharashtra provision as well as in Punjab and Haryana provision, three relevant events which ultimately culminated into taxing event were as under :

(i) purchase of concerned goods (and materials) by the concerned dealer or his commission agent;

(ii) use of such goods in the manufacture of taxable goods; and

(iii) despatch of the goods so manufactured to places outside the State but without entering into any sale of these despatched goods to outside agency.

53. There three event clubbed together were treated by the Supreme Court ultimately culminate into the taxable event which took place on the despatch of the manufactured articles outside the State without being subjected to inter-State sale and consequently, such event was treated, such taxing tax on consignment of goods outside the State. Obviously, such taxing measures would be covered by entry 92B of the Union List and could not be covered by entry 54 of the State List. It is precisely for this reason that those two impugned provisions were struck down by the Supreme Court by treating them as beyond the legislative competence of the State Legislatures of Punjab and Haryana and Maharashtra, respectively. While deciding as above, Sabyasachi Mukharji, J., at page 95 of the Report laid down the contours of taxable event while dealing with the Punjab and Haryana provision, as under :

"Taxable event is that which on its occurrence creates or attracts the liability to tax. Such liability does not exist or accrue at any earlier or later point of time. The identification of the subject-matter of a tax is to be found in the charging section. In this connection, one has to analyse the provisions of section 9(2)(b) as well as section 9(1)(b) and 9(1)(c). Analysing the section, it appears to us that the two conditions specified, before the event of despatch outside the State as mentioned in section 9(1)(b), namely (i) purchase of goods in the State, and (ii) using them for the manufacture of any other goods in the State are only descriptive of the goods liable to tax under section 9(1)(b) in the event of despatch outside the State. If the goods do not answer both the descriptions cumulatively, even though these are despatched outside the State of Haryana, the purchase of those goods would not be put to tax under section 9(1)(b). The focal point in the expression 'goods, the sale or purchase of which is liable tax under the Act' is the character and class of goods in relation to exigibility. In this connection, reference may be made to the observations of this Court in Andhra Sugars Ltd. v. state of Andhra Pradesh [1968] 21 STC 212; [1968] 1 SCR 705. On a clear analysis of the said section, it appears that section 9(1)(b) has to be judged as and when liability accrues under that section. The liability to pay tax under this section does not accrue on purchasing the goods simpliciter, but only when these are despatched or consigned out of the State of Haryana. In all these cases, it is necessary to find out the true nature of the tax. Analysing the section, if one looks to the purchases tax under section 9, one gets the conclusion that the section itself does not provided fro imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods, losing their original identity, and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created. It is the cumulative effect of the event which occasions or causes the tax to be imposed, to draw a familiar analogy, it is the last straw on the camel's back."

54. At page 111, while dealing with the Maharashtra legislation, Mukharji, J., viewing the impugned Maharashtra legislation in the context of the Forty-sixth Amendment to the Constitution, laid down as under :

"On an analysis we find that the goods which are despatched are different products from the goods on the purchase of which purchase tax was paid. The Maharashtra legislation has to be viewed in the context of Forty-sixth Amendment to the Constitution. The Forty-sixth Amendment introduced article 269(1)(h) which lays down that the proceeds of the tax on consignment of goods (whether the consignment is to the person making it or to any other person) where such consignment takes place in the course of inter-State trade or commerce, will be assigned to the States. The said amendment also introduced entry No. 92B in List I of the Seventh Schedule. The said amendment was made on the consideration of the 61st Report of the Law Commission. Entry 92B in List I of the Seventh Schedule and article 269(1)(h) of the Constitution bring within its sweep the consignment of goods by a person either to himself or to any other person in the course of inter-State trade or commerce. Article 269(3) gives the power to Parliament to formulate the principles for determining when a consignment of goods takes place in the course of inter-State trade or commerce. If entry 92B of List I is to be given the widest interpretation, as it should be, it would be clear that, as a result of the constitutional changes introduced by the Forty-sixth Amendment in article 269 read with the entry, the tax on consignment of goods now comes within the exclusive legislative filed of Parliament. The true test to find out what is the pith and substance of the legislation is to ascertain the true intent of the Act which will determine the validity of the Act. If the Parliament in exercise of its plenary power under entry 92B of List I, imposes any tax on the despatch or consignment of goods, Parliament will be competent to do so. It is, therefore, not possible to accept the argument that the chargeable event was lying dormant and is activated only on the occurrence of the event of despatch. The argument on the construction of the enactment is misconceived. The charging event is the event the occurrence of which immediately attracts the charge. Taxable event cannot be postponed to the occurrence of the subsequent condition. In that event, it would be the subsequent condition the occurrence of which would attract the charge which will be taxable event. If that is so, then it is a duty on despatch. In that view of the matter, this charge cannot be sustained."

55. Ranganathan, J., concurring with the view of Mukharji, J., has made the following pertinent observations at page 114 of the Report :

"To me it appeared as plausible to describe the levy as a tax on purchase of goods inside the State (which attaches itself only in certain eventualities) as to describe it as a tax on goods consigned outside the State but limited to the value of the raw material purchased inside the State and utilised therein. I, therefore, had considerable doubts not only during the arguments but even sometime thereafter as to whether so long as the tax purports to be a tax on purchases and has a nexus, though a little distant, with purchase of goods in the State, the Government's competence to impose such a tax should not be upheld. But, on deeper thought, I am inclined to agree with the conclusion of my learned brother. It is one thing to levy a purchase tax where the character and class of goods in respect of which the tax is levied, is described in a particular manner (vide Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 (SC); [1968] 1 SCR 705) and a case like the present where the tax, though described as purchase tax, actually becomes effective with reference to a totally different class of goods and, that too, only on the happening of an event which is unrelated to the act of purchase. The 'taxable event', if one might use the expression often used in the context, is the consignment of the manufactured goods and not the purchase. I also agree with my learned brother that the decision in State of Tamil Nadu v. Kandaswami [1975] 36 STC 191 (SC), though rendered in the context of an analogous provision, does not touch the issue in the present case."

56 .In the light of the aforesaid observations of the learned Judges of the Supreme Court made in Goodyear case [1990] 76 STC 71, it becomes at once clear that on the language employed by the impugned provisions before them, especially viewed in the light of the constitutional backdrop, provided by the Forty-sixth Constitutional Amendment, it was obvious that the impugned provisions examined by the Supreme Court squarely fell within the Parliament's exclusive power flowing from entry 92B of he Union List and were clearly beyond entry 54 of he State List. It has to be kept in view that under entry 54 of the state List, the State Legislature has power to impose tax on sale or purchase of goods. The phrase "sale of goods" employed by entry 54 has to be understood in the light of its meaning flowing from the provisions of the Sales of Goods Act, 1930. This aspect of the matter is well-settled by a series of judgments of the Supreme Court. We may refer to one such decision of the Supreme Court in the case of Joint Commercial Tax Officer v. Young Men's Indian Association [1970] 26 STC 241; AIR 1970 SC 1212, wherein, Grover, J., Speaking for the Constitution Bench of the Supreme Court observed in para 11 of the Report (at pages 246-247 of STC), while considering the question whether supply of various preparations by each club to its members involved a transaction of sale within the meaning of the Sale of Goods Act, 1930, that the State Legislature being competent to legislate only under entry 54, List II of the Seventh Schedule to the Constitution, the expression "sales of goods" bears the same meaning which it has, in the above. It is, therefore, obvious that when the State Legislature seeks to impose tax on sale or purchase of any goods, such taxing provision would remain within the bounds of entry 54 of the State List provided the concerned goods are purchased or sold within the State and they retain their identity as such goods. In goodyear case [1990] 76 STC 71, the impugned provisions of the Punjab and Haryana and Maharashtra Acts were found to be so couched that the taxing event occurred when the manufactured goods were despatched outside the State. These manufactured goods were not purchased by the dealers in the State. These manufactured goods were not purchased by the dealers in the State. On the contrary, they had purchased raw materials or inputs which had get exhausted and had lost their identity and new products had emerged and these new products at the state of their despatch outside the State were sought to be brought within the taxing net. Such taxing net woven by the State legislation obviously cannot have any nexus with the purchase of inputs within the State. There was no nexus left between the two and hence, it was held by the Supreme Court that the so-called purchase tax on raw materials could not cover the despatch of finished products manufactured within the State and, therefore, in pith and substance, the impugned legislations were imposing consignment tax. Hence, before the ratio of the Supreme Court judgment in Goodyear case [1990] 76 STC 71, can be pressed in service for voiding the impugned provision of section 15B, it must be found whether the impugned provision in substance seeks to tax purchased raw material and stop short by locating them and imposes tax on them, or whether it seeks to tax finished products manufactured out of them and which are sought to be despatched out of the State limits. If the impugned provision seeks to tax in substance the consignment of finished manufacture taxable goods in the manufacturing of which purchased raw materials have gone in as inputs, then only, it can be said on the ratio of Goodyear case [1990] 76 STC 71, that the impugned provision would fall within entry 92B of the Union List and not in entry 54 of the state List. When we scrutinise the provision of section 15B, we do not find even a whisper about consignment of manufactured goods prepared out of utilisation of purchased raw material and their despatch outside State. It may be that, having taken a clue from the Supreme Court decision, the State Legislature might have thought it fit to put its house in order. But if it has retraced its steps from the forbidden field and enacted new provision which does not seek to levy any tax on consignment of finished products outside the State, it would be too much to hold that in substance and in disguised form, the said proviso still amounts to tax on consignment of finished products. It has to be visualised that as clearly observed by Ranganathan, J., at page 114 of the Report and Sabyasachi Mukharji, J., at page 111 of the Report in Goodyear case [1990] 76 STC 71, only because the impugned provisions before them sought to tax despatch of manufactured goods outside the concerned States, that they came to the conclusion that such exercise directly collided with the Parliament's exclusive power under entry 92B of the Union List. Such eventuality cannot occur on the express language of the impugned provision of section 15B. The learned advocates of the petitioners submitted that it is a legislative device to get out of the decision in Goodyear case [1990] 76 STC 71. We do not agree. If by process of tax planning, a taxpayer can so arrange his affairs as to avoid attraction of charging event, similarly, Legislature also can put its house in order and can repeal obnoxious provision which might be beyond the legislative competence and enact a valid provision keeping its provisions within the bounds of the concerned entry in the State List. If such exercise is permissible and can be sustained by a given entry in the State List, it cannot be faulted on the ground that it is a device. It is merely putting one's house in order. The Legislature can also validly do so on the same lines as a taxpayer can put his house in order by resorting to permissible tax planning. If legitimate tax planning by a taxpayer can be countenanced, legislative planning by tax imposer cannot be a taboo. In this connection, it will be useful to refer to the Constitution Bench decision of the Supreme Court in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh [1980] 45 STC 36; AIR 1980 SC 286. The question before the Supreme Court was whether section 3 of the U.P. Sugarcane (Purchase Tax) Act, 1961, was beyond the scope of entry 54 of the State List and was governed by entries 52 and 97 of the Union List. Trailing earlier legislative history of the impost it was urged by the petitioners that in 1956 sugarcane cess was imposed by U.P. Legislature. It was struck down by the Supreme Court in Diamond Sugar Mills case AIR 1961 SC 652 holding such levy of cess as ultra vires State Legislature. Hence the new purchase tax was a legislative device to impose similar impost as purchase tax, and it could not be countenanced. Repelling this contention, Krishna Iyar, J., speaking for the Constitution Bench in this case made the following pertinent observations in para 18 of the Report (at page 42 of STC).

"The cess under the 1956 Act was attacked and fell victim to a constitutional challenge and this Court in Diamond Sugar Mills' case AIR 1961 SC 652; [1961] 3 SCR 242, declared the cess Act ultra vires. The consequence of this mortality was the incarnation of the U.P. Sugarcane (Purchase Tax) Act, 1961, which is being impeached as ultra vires in these appeals. When cess failed, the State would have been constrained to refund nearly half a hundred crores of rupees. Validation by Parliamentary legislation in conformity with the Constitution was, therefore, done. Eventually the levy of a purchase tax was enacted into law by the U.P. Sugarcane (Purchase Tax) Act, 1961 (referred to as "the Act"). In a fiscal sense, the Purchase Tax Act is a reincarnation of the cess Act but, in a legislative sense, it is an independent statute with a different source of power, impact and structure. While the appellants have a case that this fiscal history substantiates their thesis that the present purchase tax is a disingenuous disguise, the State contends that its power to impose a purchase tax is well within List II, entry 54. An appeal to history cannot impeach power. Plainly read, the Act, architectures a typical tax scheme, leviable at the purchase point with one difference ............"

57. Realising the position that the express language of the section does not bring within its sweep any concept of consignment tax, the learned advocates for the petitioner submitted that this provision has to be read with rule 42E of the Rules and when read together, the conclusion is inevitable that the impugned taxing measure was in substance imposing tax on consignment and would be still covered by entry 92B of the Union List and would go out of entry 54 of the State List. We have already extracted earlier in Part II of the judgment, the said rule. It is true that the rule was promulgated by the State of Gujarat after the amending Ordinance was issued by the Government and before the Gujarat Amending Act 6 of 1990 was enacted. But it has to be kept in view that the Act is enacted by the parent Legislature, viz., State Legislature while the rule is enacted by the delegate of the Legislature, viz., State, in exercise of its power under section 86. Under section 86, the State Government is empowered by a notification in the official gazette to make rules for carrying out the purposes of the Act. Placing reliance on a series of decision on the point, viz., Karimtharuvi Tea Estate Ltd. v. State of Kerala [1963] 48 ITR 83 (SC), J.K. Steel Ltd. v. Union of India AIR 1970 SC 1173, Tata Engineering & Locomotive Co. Ltd. v. Gram Panchayat AIR 196 SC 2463, Collector of Central Excise v. Parle Exports (P) Ltd. [1989] 75 STC 105 (SC); AIR 1989 SC 644, Kailash Nath v. State of U.P. [1957] 8 STC 358 (SC); AIR 1957 SC 790 and Prabhat Solvent Extraction Industries Pvt. Ltd. v. State of Gujarat [1982] 49 STC 322 and a decision of this Court in I.C.G. Textile Industry v. S.M. Corporation (1984) 25 GLR 197, it was submitted by the petitioners that in order to cull out the real scope and ambit of the statutory provision, statutory rules framed under the Act have also to be kept in view and both are to be harmonised and read together. The learned Advocate-General did not dispute this proposition. However, his contention was that given all that, when the question of legislative competence of the parent Legislature to enact the provision comes up, merely because the delegate has framed a rule in exercise of its delegated legislative function under the Act and which rule may be part of the Act, the rule cannot be pressed in service to denude legislative competence of the parent Legislature to enact statutory provision, if even otherwise, it is within its competence. We find considerable substance in the aforesaid contention of the learned Advocate-General. It has to be kept in view that section 15B seeks to impose additional purchase tax. Gujarat Legislature has now enacted the provision imposing purchases tax as per section 15B of the Act. This is not in dispute. Its legislative competence to impose purchase tax under section 15A is not in dispute. If that is so, it is difficult to visualise how additional purchase tax cannot be imposed under section 15B if it remains otherwise within the compass of entry 54 of the State List. Merely because rule framed by the delegate State of Gujarat in exercise of its delegated legislative function waters down the impact of the section, it cannot be said that the section is not within the legislative competence of the State Legislature which is the paramount legislative body. It was further submitted by the learned advocates for the petitioners that section 6 of the Act makes even the rules framed by the delegated legislative functionary a part of the charging provision, section 6 itself being a charging section. It is difficult to agree. Section 6 of the Act provides that subject to the provisions of this Act, and to any rules made thereunder there shall be paid by every dealer, who liable to pay tax under this Act. Portion makes it clear that liability to pay tax arises under section 6 and other provisions. To that extent, it may be a part of charging provisions. Still, so far as rules are concerned, they cannot by themselves creates any charge. It is obvious that a delegate of Legislature by exercising subordinate legislative power cannot create a new charge. It can only regularise its impact and sweep in given contingencies. Rules framed under the Act which are referred to in section 6 can regulate manner of payment of tax and assessment of liability. Therefore, the measure of tax and payment thereof may be regulated by rule but these rules by themselves cannot be treated as repository of the charging events emanating from the relevant statutory charging provisions. So far as this aspect is concerned, Mr. Pathak for the petitioners placed strong reliance on the observations of the Supreme Court in [1975] 36 STC 191 (State of Tamil Nadu v. Kandaswami). In that case, the Supreme Court was concerned with section 7-A of the Madras General Sales Tax Act, which read as under :

"(1) Every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable under section 3, 4 or 5, as the case may be, and either, -

(a) consumes such goods in the manufacture of other goods for sale or otherwise; or

(b) disposes of such goods in any manner other than by way of sale in the State; or

(c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in section 3, 4 or 5, as the case may be, whatever be the quantum of such turnover in a year :

Provided that a dealer (other than a casual trader or agent of a non-resident dealer) purchasing goods [the sale of which is liable to tax under sub-section (1) of section 3] shall not be liable to pay tax under this sub-section, if his total turnover for a year is less than twenty-five thousand rupees .........."

58. In that case, the Supreme Court took the view that section 7-A was an additional charging section and in this connection, observed that the words "under the Act" will include a charge created by section 7-A also. Taking a clue from the above observations, Mr. Pathak argued that section 6 of the Gujarat Act also employs the words "dealer who is required to pay tax under this Act" and these words themselves would make section 6 charging section. Even accepting this contention we fail to see how rule 42E can be said to be a part of the charging provision envisaged by section 15B. If at all, it whittles down or dilutes the charge envisaged by section 15B, but does not add to it. Even if section 6 is a part of charging provisions, rule referred to by it cannot get such a status.

59. It is not in dispute that section 15B is a charging provision imposing additional purchase tax. Section 3 is another such charging provision. This provision created a charge and liability to pay tax. How payment in discharge of this liability is to be made will regulated by the rules made under the Act. If we turn to rule 42E, we find that it is part of Chapter 7 of the Rules which dealer with grant of drawback, set-off and refund. This rule deals with regulation of assessment procedure and how certain drawbacks, set-off, refund are to be given to assessees once they have incurred liability to pay tax under the parent charging provision of the Act. Rule 42E is one such rule which has been inserted after rule 42D and it also deals with drawback, set-off, etc., to be given to the concerned dealers who have become liable to pay tax under section 15B provided the conditions laid down by rule 42E are complied with by the concerned assessee. It is well-settled that charge of tax is a concept which is different from the concept of assessment of such tax liability and the quantification thereof. Instead of rule 42E, if statutory provision was made by way of sub-clause to section 15B, then, the petitioners would have been justified in urging some emphasis that it was part of the same legislative scheme and had to be read with the impugned provision. But it is not the case here. In fact, such was the situation which prevailed in connection with the impugned provisions of the West Bengal Sales Tax Act which were considered by the Calcutta Sales Tax Tribunal in R.N. Case Nos. 10 and 283 and others (Rasoi Limited v. State of West Bengal [1991] 80 STC 356) on which reliance was placed by Mr. Kaji for some of the petitioners. As the charging provisions and the relevant refund provisions were apart and parcel of the same statutory scheme, the Tribunal took the view that both represented a well-knit integrated legislative scheme. Such is not the case here. The rule is not framed by the same parent Legislature which has enacted the section. Even otherwise, if enactment of the section is within the competence of the parent legislative body only because the delegate legislative functionary had thought it fit to dilute the rigour of the charge imposed by the Legislature by enacting section 15B, it cannot be said that the action of the delegate takes the impugned provision beyond the competence of the parent Legislature. It would amount to throwing the baby out with bath water. On no principle, such argument can be countenanced nor any cannon of construction of statutory provisions and statutory rules can support such an argument. At this stage, we may refer to the judgment of the Division Bench of the Bombay High Court in Hindustan Lever Ltd. v. State of Maharashtra [1990] 79 STC 255. Interpreting the impugned provisions of section 13AA of the Maharashtra Act, the Division Bench of the Bombay High Court speaking through S., P. Bharucha, J., repelled the argument which was submitted on the ground that the said section sought to impose consignment tax. It is pertinent to note that unlike the present provision, the Bombay provision was a composite provision and which created a charge and laid down how it had to be worked out. Therefore, it was an integral scheme and it had provided that in the event of non-sale of manufactured goods in the State, when the goods were manufactured out of purchased raw materials tax was attracted. In the view of the High Court, such provision did not amount to imposing a consignment tax, as event of non-sale would not necessarily mean consignment out of State. At page 267 of the Report, the Division Bench noted the argument of the learned advocate for the petitioners to the effect that "A dealer, they said, manufactured goods so as to sell them. What is he did not sell within the State he sent for sale outside the State. The tax under the new section 13AA was, therefore, as much a tax on consignment as was the old section 13AA. The argument, attracting though it is, proceeds upon the assumption that what the dealer does not sell within the State he will send outside the State for sale. We cannot invalidate a taxing provision proceeding upon an assumption."

60. We respectfully concur with the said view of the Bombay High Court. In the present case, even assuming that rule 42E is treated to be part and parcel of the taxing scheme envisaged under section 15B, even then, on the combined operation thereof, the position that results is that if the goods manufactured in the State out of the purchased raw material are not sold by the assessee in the State of Gujarat, he would incur liability to pay tax under section 15B, and would not be entitled to refund under rule 42E. However, merely because goods are not sold in the State of Gujarat, there is no presumption that of necessity, that would be consigned outside the State. There may be many a slip between the cup and the lip. Manufactured goods might get destroyed. Manufactured goods may not be sold but might be gifted or manufactured goods may be so defective as cannot find local market and, therefore, also, either may remain unsold or may be required to be destroyed. In all such contingencies, liability under section 15B to pay tax on the value of purchased raw material would subsist and there would be no refund under rule 42E and still, there may be no consignment of these goods outside the State. Therefore, even on a combined reading of rule 42E and section 15B, it is impossible to hold that of necessity, their conjoint effect is to levy tax on consignment of manufactured goods outside State. Even taking the architect's view of this provision and not mason's view as Mr. Joshi would like to have it, even then, we do not find the remotest trace of consignment tax embedded in the impugned provision and accordingly, it is not possible to agree with the view of the Calcutta Tribunal that such provision would impose any consignment tax. But even otherwise, we find considerable force in the argument of the learned Advocate-General for the respondents that even if rule 42E is repealed by the delegate State of Gujarat exercising delegated legislative function under section 86, even then the section 15B can exist on its own. When the two provisions stem from two different sources and even if these two provisions have to operate in the same field after getting fused subsequent to their birth, existence of one provision and especially paramount provision cannot be voided at its source only because after the subordinate provision gets fused into operation with the parent provision, lesser liability results and the rigour of the parent provision gets diluted. The learned Advocate-General also was right when he contended that if rule 42E is deleted in future, section 15B would operate with greater rigour and its impact would be felt by a larger body of assessees, because of rule 42E, sweep of section 15B gets curtailed and many assessees may go out of its taxing net. But that does not mean that charge which is otherwise validly imposed by section 15B, would get stultified or would cease to be effective at the very source. It is also not possible to agree with the contention of Mr. Pathak that while deleting the then existing section 15B, and while enacting the present provision of section 15B, the Legislature wanted in substance, to re-enact the old provision by having the same wine in two bottles. It has to be visualised that it is not as if the same Legislature has tried to put earlier existing wine in two bottles instead of one, the process of manufacturing of bottles being the same but on the contrary, a new provision or wine is tried to be bottled in one bottle and ancillary provision even though allegedly containing similar wine, is sought to be bottled in another receptacle like a can not manufactured by the same manufacturing process but by entirely different manufacturing process permitted to delegate of subordinate legislative functions. In short, only because rule 42E tries of soften the rigour of section 15B, it cannot be said that it drags main section 15B out of legislative bounds of the State Legislature flowing from entry 54 of List II of Seventh Schedule to the Constitution. We, therefore, hold that the impugned provision of section 15B does not seek to impose any tax on consignment of manufactured goods outside the Gujarat State even though such manufactured taxable goods are manufactured by utilising raw material purchased in the State. Whether section 15B is read in isolation or is read along with rule 42E, the result is the same. In neither eventuality, can it be said to be imposing tax on consignment as discussed above. Therefore, the impugned provision does not offend entry 92B of the Union List nor does it get out of entry 54 of the State List on this count. Contentions of the petitioners on this aspect are, therefore, rejected.

61. Point V-I (b). - Whether the impugned provision seeks to levy tax in the nature of excise.

62. Learned counsel for the petitioners in the alternative submitted that even assuming that the impugned provision does not impose consignment tax, in any case, it imposes tax in the nature of excise duty on the goods manufactured out of use of raw material purchased in the State. So far as this contention is concerned, we must keep in view entry 84 of the Union List which empowers the Parliament to impose excise duty on manufacture of goods. The question is whether the impugned provision encroaches on this entry. The analysis of the impugned provision of section 15B indicates that the tax under the said provision is leviable if the following events take place :

(1) Where a dealer liable to pay tax under this Act purchases either directly or though commission agent any goods; and

(2) Uses them as raw material or processing material or consumable stores in the manufacture of taxable goods.

63 .For attracting charge under the section no other event is contemplated. Adopting the judicial dictionary employed by the Supreme Court in Goodyear case [1990] 76 STC 71, taxing event is that which attracts tax and that charging event is the event the occurrence of which immediately attracts the charge and that charging event cannot be postponed to the occurrence of the subsequent condition. In that event, it would be the subsequent condition the occurrence of which would attract the charge which will be taxable event. It has to be held that the moment goods are purchased and used by the purchasing dealer as raw or processing material or consumable stores in the manufacture of taxable goods, levy gets immediately attracted under the section. As will be seen while discussing the question of user tax, taxing event is the purchase of raw materials, etc., in the State and which are ultimately used in manufacture of taxable goods. That charging event centering round purchase of raw materials, etc., remains dormant till the goods are actually put to use in manufacture of taxable goods. It gets activised then. These events have nothing to do with the ultimate manufacture of taxable goods. It is easy to visualise that ultimately taxable goods may not be manufactured even if raw or processing material or consumable stores might have been utilised in the manufacturing process. For example, even after utilisation of such raw material in the manufacturing process, the finished goods may turn out to be defective goods which cannot be sold. Therefore, manufacture of the taxable goods may have been complete and the whole lot may have to be destroyed even after utilisation of such material in the manufacturing process or before process or before process gets completed, it may be intercepted and the final product may not emerge, still, liability to pay tax under the section would emerge as user of raw material or processing material of consumable stores in the manufacturing process has taken place. Therefore, it is impossible to find nexus of the charge with the ultimate manufacture of taxable goods. It is now well-settled that excise duty is a duty or levy on the manufacture of goods. Impost is on the manufacture of goods and the new goods which are manufactured have to bear the charge of tax. In the purchase tax levied on raw materials which are inputs, there is no contemplation of the ultimate output. It is tax on purchased inputs which has been brought as inputs in the manufacturing process and there charge settled and gets exhausted. Consequently, by no stretch of imagination, such a charge can be said to be imposing excise duty on ultimate manufactured goods. The impugned section imposes tax on the dealer as purchaser and not as manufacturer of ultimate manufactured goods. We may in this connection profitably look at a few decisions of the Supreme Court and the Federal Court. In the case of Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh [1980] 45 STC 36 (SC); AIR 1980 SC 286 the Constitution Bench of the Supreme Court was concerned with the question whether levy under the U.P. Sugarcane (Purchase Tax) Act, 1961, was covered by entry 54 of the State List or whether it was imposing excise duty which was beyond the legislative competence of the U.P. State Legislature. Answering the question in favour of the State Legislature, it was held that levy could squarely fall within entry 54 of the State List and would impose no excise duty as the tax was imposed on purchase of sugarcane which was raw material and which was utilised in the manufacture of sugar. In para 53 of the Report (at page 52 of STC), Krishna Iyer, J., speaking for the Supreme Court made the following pertinent observations :

"Nothing in these provisions regulates or controls the industry itself nor exacts any levy on the manufacture of sugar or its wider ramifications. Nothing more than prevention of escapement of purchase tax on cane is done and what is done is legitimately incidental to the taxing power. Peripheral similarity between purchase tax and excise levy, does not spell essential sameness. Sugarcane tax operates in the neighborhood of sugar excise but proximity is not identity. The tax is only on purchase of cane, not its conversion into sugar. If the miller has his own cane farm and crushes it, he has no purchase tax to pay but cannot escape excise duty, if any."

64. We may also refer to another decision in Tata Iron & Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267 (SC); AIR 1958 SC 452. In that case, the Supreme Court was concerned with the vires of section 4(1) read with section 2(g) second proviso of the Bihar Sales Tax Act, which was a pre-constitution Act governed by the provisions of the Government of India Act, 1935. Entry 45 in List I of the Seventh Schedule to the Government of India Act, 1935, gave exclusive power to the Central Legislature to enact law pertaining to excise duty with respect to which the Provincial Legislature could not under section 100 of the Act, make any law. Repelling the contention that the provision was in the nature of excise duty, the Constitution Bench of the Supreme Court held that under the impugned provision, the producer or manufacturer became liable to pay the tax not because he produced or manufactured the goods, but because he sold the goods. In other words, the tax was laid on the producer or manufacturer only quo seller and not quo manufacturer or producer. A duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods and not on sales or the proceeds of sale of goods. If the goods produced or manufactured in Bihar were destroyed by fire before sale the manufacturer or producer would not have been liable to pay any tax under section 4(1) read with section 2(g), second proviso. In this connection, reliance was placed on the decision reported in [1945] 1 STC 135 (PC); AIR 1945 PC 98 (Governor-General in Council v. Province of Madras) and [1942] 1 STC 104 (FC); AIR 1942 FC 33 (Province of Madras v. Boddu Paidanna & Sons). We may also refer to a later decision of the Supreme Court in Wallace Flour Mills Company Ltd. v. Collector of Central Excise (1989) 4 SCC

592. In that case, the Supreme Court was concerned with the question as to when taxing event in case of excise duty arises. The Supreme Court examined this question and made the following pertinent observations :

"............. Even though the taxable event is the manufacture or production of an excisable article, the duty can be levied and collected at a later stage for administrative convenience. The scheme of the said Act read with the relevant Rules framed under the Act particularly rule 9A of the said Rules, reveals that the taxable event is the fact of manufacture or production of an excisable article, the payment of duty is related to the date of removal of such article from the factory."

65. In view of the aforesaid settled legal position, therefore, before any duty can be styled as one imposing excise, it has to be shown that taxing event is manufacture of excisable commodity by a person who is taxed qua such manufacture and not otherwise. As we have seen earlier, on the express language of the section, taxing event does not get extended up to the stage of manufacturing of final product out of purchased raw material and that charge of tax gets settled the moment raw material is purchased and utilised in the manufacturing process of taxable goods. A dealer is being taxed as purchaser of raw material. He is not being taxed as manufacturer of finished product. It is also pertinent to note that charge of tax attached to purchased raw materials and does not attach to the final product produced out of them. Hence, it can never be styled as excise duty on the ultimate manufactured goods. They are entirely of different class. They have nothing to do with purchase of raw materials or inputs. All inputs which get exhausted in the manufacturing process have nothing to do with nor have they nexus with the ultimate output. Excise duty is on output and not on inputs. Such type of tax is not contemplated by section 15B. The submission of the learned advocates for the petitioners that this section in substance imposes a tax in the natures of excise because manufacture contemplated by the section is of taxable goods and, therefore, till taxable goods emerge, taxing event would not be complete, cannot be countenanced for obvious reasons. Taxable goods are defined by section 2(33) as goods other than those on the sale or purchase of which no tax is payable under section 5 or section 49 or a notification issued thereunder. The learned Advocate-General was right when he contended that which types of goods are covered by section 4 or section 49 are clearly indicated by the Legislature. A manufacture/dealer who proceeds to manufacture taxable goods knows very well at the stage the manufacturing process starts as to which goods are sought to be manufactured by utilising raw materials. Ultimately, whether the concerned goods which he produces bear full burden of tax or get partial or full exemption from payment of tax on the happening of certain contingencies will have nothing to do with the question whether raw materials, etc., were utilised for manufacturing such goods. Measure of tax or ultimate liability to pay tax either wholly or partially on manufactured goods cannot have any impact on the question whether purchased raw materials were used or utilised in the manufacturing process for producing such manufactured goods. Reliance placed in this connection by the learned Advocate-General on the decision of the Supreme Court in [1975] 326 STC 191 (State of Tamil nadu v. Kandaswami) is justified. Referring to a similar question which arose in connection with section 7-A of the Tamil Nadu Act, the Supreme Court in that case held that taxable goods would mean the goods, the sale or purchase of which is generally taxable under the Act. Notwithstanding the goods being taxable goods, there may be circumstance in a given case by reason of which the particular sale or purchase does not attract tax under section 3, 4 or 5. Sub-sections (4) and (5) of section 7-A with which the Supreme Court was concerned read as under :

"(4) The goods purchased are goods, the sale or purchase of which is liable to tax under this Act;

(5) Such purchase is in circumstances in which no tx is payable under section 3, 4 or 5, as the case may be."

66. Analysing these ingredients of section 7-A, the aforesaid observations wee made by the Supreme Court. It is true that in the present case, there is a clear definition of taxable goods; while in Tamil Nadu Act, on the ingredients of sub-sections (4) and (5), the Supreme Court held that these sub-sections contained definition of taxable goods. However, the result remains the same. Ingredients of sub-sections (4) and (5) of Tamil Nadu Act are parallel to the provisions found in the definition of taxable goods in section 2(33) of the Gujarat Act. Therefore, it must be held on parity of reasoning, that the phrase "uses them as raw material or processing materials or consumable stores in the manufacture of taxable goods" as employed by section 15B would mean user of such raw material in the manufacturing process for manufacturing generally taxable goods under the Act and ultimately, in given circumstances, such manufactured goods may not attract tax under the charging provision and still they would remain taxable goods. It is, therefore, not possible to agree with the contention of the petitioners that charging event under section 15B would be manufacture of taxable goods. As already discussed earlier, charging event would stop short at the stage of utilisation of the purchased raw material in the manufacturing process of taxable goods. Ultimately such taxable goods may emerge or not. That would be totally irrelevant, but the charge would operate under the section of its own the moment goods are purchased and utilised as raw materials, etc., in the manufacturing process of generally taxable goods. Our attention was also invited by the learned advocates for the petitioners to a decision of this Court in Nowroji N. Vakil & Co. v. State of Gujarat [1979] 43 STC 238. In that case, the Division Bench of this Court was concerned with the question whether the assessee who had purchased certain raw material under a certificate was liable to pay purchase tax under section 16, when it was found that the raw material purchased by him was not ultimately utilised for manufacturing taxable goods. It is obvious that if raw material is utilised for manufacture of taxable goods the goods would bear sales tax at the stage of sale. But if the manufactured goods are exempt from sales tax, then, the condition of the certificate would get breached and the liability to pay purchase tax on the raw material would subsist. On the facts of the case, it was found that the assessee-company which was manufacturing stoneware pipes, firebricks and lime, required as raw material for its business, fireclay, which were taxable goods under the residuary entry 13 of Schedule III of the Act. The assessee purchased fireclay against declarations in form 19 without payment of tax. Out of the goods manufactured by using the goods so purchased, a certain quantity of goods was sold against a certificate in form C, without recovery of any tax, to an electricity company, which was a certified electrical undertaking within the meaning of entry 5 of the Schedule to the Government notification dated 29th April, 1970. The Sales Tax Officer took the view that the assessee, contrary to the certificate given by it in form 19 at the time of purchase, had used the fireclay as raw material in the manufacture of goods, the sales of which could not be taxed and that, therefore, purchase tax was leviable under section 16 of the Act is respect of such purchases of fireclay. The Appellate Assistant Commissioner of Sales Tax and the Tribunal agreed with the view of the Sales Tax Officer. The High Court also agreed with the view of the Tribunal. It was held that in view of the language used in the certificate as well as in section 16(1) and in the context and collocation, the intention at the time of purchase or the taxable nature of the goods when manufactured are wholly irrelevant factors. If taxable goods were purchased against the certificate in form 19 without payment of tax and if such goods were used contrary to the certificate in the manufacture of goods for sale, which were not exigible to tax at the point of sale, then section 16 would come into the picture and purchase tax would become leviable upon the turnover of purchases of the purchasing dealer. The aforesaid view of this Court is confirmed by the Supreme Court in the later decision reported in [1981] 47 STC 376 (Hindustan Brown Boveri Ltd. v. State of Gujarat). In our view, these decisions cannot be of any avail to the petitioners. If the condition of a certificate issued under section 16 is breached, then on the express language of section 16, liability to pay purchase tax would arise and the section in terms lay down that where any dealer or commission agent has purchased any taxable goods under a certificate given by him under section 12 or 13, contrary to such certificate, the goods are used for another purpose or are not resold or despatched in the manner and within the period certified, then such dealer or commission agent shall be liable to pay tax on the purchase price of the goods purchased under such certificate. It is difficult to appreciate how these decisions can be of any avail to the petitioners. In the present case, once raw materials are utilised in the manufacturing process for manufacturing taxable goods which are generally taxable under the Act, charge under section gets attracted. Ultimately, if the manufactured goods are found not to bear tax, then the question of refund at the stage of assessment may arise. But that by itself would not whittle down the charge or postpone it in my manner as suggested. It is also not possible to agree with the contention of the learned advocates of the petitioners that under the present section, the charge would extend even beyond the manufacture of taxable goods till manufactured taxable goods actually bear the tax. Actual liability to pay tax is quite distinct from general taxability of the goods manufactured, as laid down by the Supreme Court in Kandaswami case [1975] 36 STC 191. In fact, once purchased raw material is utilised in the manufacturing process, charging event gets completed under the section and the aspect whether ultimately the manufactured goods emerge or not, would pale into insignificance as seen earlier. It is not the taxing event under the section. Once taxing event takes place, subsequent event pales into insignificance. Thus, it is not possible to agree with contention of the learned advocates of the petitioners that the impugned provision seeks to impose excise duty or tax in the nature of excise. Decision of the Bombay High Court in [1990] 79 STC 255 (Hindustan Lever Ltd. v. State of Maharashtra) strongly pressed in service by the learned advocates of the petitioners with respect cannot be agreed to. It is difficult to agree with the reasoning of the Bombay High Court in the aforesaid decision to the effect that under section 13AA, levy takes effect on the occasion of manufacture and, therefore, levy is in the nature of excise. Such a line of reasoning is not countenanced by the section. Neither in section 13AA of the Maharashtra Act nor in section 15B of the present case levy is imposed on the manufacture of taxable goods. As laid down by the Supreme Court in Goodyear case [1990] 76 STC 71, taxable event is one on the occurrence of which charge gets immediately attracted. In our view, charge gets attracted when the raw materials are purchased and used in the process of manufacture of taxable goods and it has nothing to do with ultimate emergence of taxable goods. They may emerge or may not emerge, they may remain taxable goods or may not remain taxable goods. Charge under the section is not concerned with these eventualities. Under these circumstances, with respect, it is not possible to agree with the view taken by the Bombay High Court in Hindustan Lever case [1990] 79 STC 255. In our view, section 15B does not cover the field envisaged by entry 84 of the Union List, and cannot be termed as imposing any duty in the nature of excise. In this connection Mr. Kaji submitted that the impugned provision can be read as under : A dealer purchases raw material, processing material or consumable stores, etc., and manufactures taxable goods out of them and accordingly, it would amount to imposing tax in the nature of excise. It is not possible to agree with this contention, for the simple reason that the section couched in different term cannot be re-read on the basis of supposed redrafting so as to make it one imposing excise duty, if the Legislature has not thought it fit to utilise such terminology. On the other hand, the learned Advocate-General was right when he contended that as per the phraseology employed by the section, tax becomes payable when the manufacturer/dealer purchases raw material, processing material or consumable stores and uses them in the manufacturing of taxable goods. The section nowhere contemplates the phraseology like "and use them for manufacture of taxable goods". Consequently, the moment goods are purchased as inputs and user of the purchased raw material, etc., is made in the manufacturing process and they enter as inputs in the manufacture of generally taxable goods, charge under the Act gets completely settled and attracted. Such charge has nothing to do with ultimate stage of manufacture of taxable goods nor does it cover it in its sweep.

67. Accordingly, the contention of the learned advocates of the petitioners to that effect stands rejected.

68. Point VI (c). - This leaves out for consideration the last prong of challenge to the legislative competence for enacting section 15B. It was vehemently contended by the learned advocates for the petitioners that on a proper construction of the section, in any case, taxable event which can be culled out therefrom is the event when purchased raw materials, etc., are used in the manufacturing process and, therefore, in substance, tax imposed is user tax or tax on consumption of these purchased raw materials, etc., and that has nothing to do with the earlier purchase of these raw materials. It is not possible to agree with the aforesaid contention for obvious reason. To be a user tax or tax on consumption, the legislation must directly aim at taxing user or consumption. In short in pith and substance, the Legislature must cover such topic or try to directly shoot at consumption or use of raw materials. If that happens, tax would fall under the residuary entry 97 of the Union List and would go out of entry 54 of the State List. When we look at section 15B, we do not find anything to indicate that the Legislature was aiming to directly hit the transaction covering use or consumption of raw material. In short, that was not the focal point of levy or, in other words, that was not the pith and substance of the levy. The pith and substance of the levy is purchase of raw material, etc., in the State.

69. In this connection, the emphasis put by the learned advocates for the petitioners on the phraseology in the section to the effect "where a dealer purchases any taxable goods and uses them as raw or processing materials or consumable stores in the manufacture of taxable goods then ...." for submitting that taxable event occurs when purchased taxable goods are used as raw or processing material or consumable stores in the manufacturing process especially in the light of the word "then" used in the section, also cannot be of any avail. In this connection, the learned Advocate-General rightly invited our attention to the fact that the word "then" is an advert and it connotes two eventualities - (i) reference to the time and (ii) reference as to the contingency, meaning thereby, it either means at that time or in that case. In the context of the section, it is obvious that the word "then" does not refer to time when use is made in the manufacturing process of such purchased raw materials, etc. But it only means in the case, such purchased raw materials, etc., are used in the manufacturing process. Taxable event under the section becomes complete when taxable goods, viz., raw materials, consumable stores, etc., are purchased in the State with the obvious intention of utilising them in the manufacturing process as input and the moment such intention gets fructified by such actual user. It is apparent that taxable event which becomes complete on purchase of such materials, etc., in the State by the dealer, may remain dormant till such purchased material is actually used in the manufacturing process. The moment such use is made of the purchased raw material, the charging event would get activised. It has to be kept in view that under entry 54 of the State List, the State Legislature is entitled to tax sales and purchase of goods. It is also well-settled by a catena of decisions of the Supreme Court right from Tata Iron & Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267; AIR 1958 SC 45 that the term "sale of goods" as employed under entry 54 of the State List has the same meaning as assigned to it under the Sale of Goods Act, 1930, as we have already noted earlier. Consequently, before a legislation can in pith and substance, be said to be dealing with sale or purchase of goods, it must be shown that it focuses its attention on such transactions of purchase or sale of goods. These goods remain the focal point and at the centre of the charging event. If goods are so traced and dealt with by the section their purchase or sale would be taxing event and the conditions in connection with payability of the tax on such transaction of sale or purchase at these goods would only imply description of the goods and condition subsequent to completion of taxable event. It must, therefore, be held that section 15B in pith and substance imposes purchase tax on purchase of concerned goods which are ultimately used in manufacturing process as inputs and the later phraseology "uses them in manufacture" as employed in the section only deals with description of the charged goods and represents subsequent event. In this connection, it is apposite to refer to the decision of the Supreme Court in Goodyear case [1990] 76 STC 71 especially observations at pages 95, 111 and 114 thereof which are already extracted in extenso in the earlier part of this judgment. A conjoint reading of those observations makes it clear that the Supreme Court in that case was concerned with an eventuality wherein tax was imposed on dispatch of entirely different types of goods out of State, and it was held that it was tax in the nature of consignment tax covered by entry 92B of the Union List, and, therefore, tax on such goods would not remain within entry 54 of the State List and that in view of such a texture of the provisions, the argument of the learned advocate for the State authorities that taxing event was to have taken effect at the time of purchase of inputs, raw materials, which remained dormant and would get activised when the input embedded in the ultimately manufactured goods got despatched out of the State, was repelled as such argument could not be countenanced in the fact of the express language of the provisions dealt with by the Supreme Court and which clearly referred to and tried to tax entirely different manufactured commodity which had nothing to do with the original purchase of inputs. Such is not the position in the present case. As seen earlier, the section does not refer to the dispatch of ultimately manufactured goods out of the State. It is, therefore, not levying any consignment tax nor is it concerned with any levy on ultimately manufactured goods out of inputs. Consequently, it remains in the domain of purchase tax imposed on inputs which are purchased in the State and which are ultimately used in the manufacturing process. It is obvious that, there would remain no occasion to collect any sales tax on such inputs as they are never put to sale in the State and they get used up in the manufacturing process. Hence qua such purchaser of raw materials who uses them in the manufacturing process as inputs, purchase tax can legitimately be imposed and it remains a genuine purchase tax. In the light of the express language of the section, therefore, the argument of the learned advocates for the petitioners that the phrase "uses them in the manufacturing of taxable goods" denotes taxable event and not the earlier part of the section dealing with purchase of such raw materials, cannot be countenanced. We may not at this stage that the Constitution Bench decision of the Supreme Court in Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212 clearly answers the question against the petitioners and puts the controversy beyond the pale of any doubt. In that case, the Supreme Court was concerned with the question whether tax imposed by the Andhra Pradesh legislation levying purchase tax on sugarcane required for use in manufacturing of khandsari sugar can be legitimately imposed by the State Legislature under entry 54 of the State List. The Constitution Bench decision in terms held such tax to be within the legislative competence of the State Legislature, as covered by entry 54 of the State List and the taxing event was construed to be the event of purchase of such raw materials are required for use in the manufacturing process. The learned advocates for the petitioners submit that the phraseology in the aforesaid provision was different as compared to the present phraseology in the aforesaid provision was different as compared to the present phraseology of section 15B, as there, the words used were "required for use in manufacture"; while here, the words used are "purchase of raw materials and use in the manufacturing process". In our view, this is a distinction without any difference. When raw materials are purchased as they are required for use, it is obvious that they have to be used for that purpose subsequently and when raw materials are purchased and are subsequently used as such in manufacturing process, it would become obvious that they were purchased only because they were required to be so used and were in fact used. Applying the ratio of the aforesaid decision of the Supreme Court, it must, therefore, be held that in the present case also, taxable event is complete when taxable goods are purchased as raw material, etc., and there subsequent use as such only fortifies such requirement underlying initial purchase. It is also interesting to note that there are two decisions of the Supreme Court, wherein on construction of pari materia provisions, it was held that tax sought to be imposed was purchase tax. One such decision is rendered in connection with Madhya Pradesh legislation in the case of Ganesh Prasad Dixit v. Commissioner of Sales Tax [1969] 24 STC 343 (SC). In that case, section 7 of the Madhya Pradesh General Sales Tax Act, fell for consideration of the Supreme Court. It provided that every dealer who in the course of his business purchases any taxable goods, in circumstances in which no tax under section 6 is payable on the sale price of such goods and either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods, etc., shall be liable to pay tax. The aforesaid phraseology ran almost parallel to the phraseology of section 15B of the present Act. Such a tax was considered to be genuine purchase tax on construction of the provisions. It is true that in that case, the Supreme Court was not concerned with the legislative competence of the Madhya Pradesh Legislature. Still, from the point of view of taxable event, the decision clearly contraindicates the contention of the petitioners on such a pari materia provision. Second decision of the Supreme Court is rendered in the case of State of Tamil Nadu v. Kandaswami [1975] 36 STC 191. Section 7-A of the Madras General Sales Tax Act, 1959 which was considered in the said decision provided as under :

"Every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable under section 3, 4 or 5, as the case may be, and either (a) consumes such goods in the manufacture of other goods for sale or otherwise, etc., shall pay tax."

70. It becomes at once clear that the relevant provision of the aforesaid section of the Madras Act are also pari materia with section 15B of the present case, and on consideration of the above scheme the Supreme Court took the view that it was imposing purchase tax and the section would operate of its own. It is also true that even in that case, the Supreme Court was not directly concerned with the legislative competence of the Tamil nadu Legislature in enacting this provision. However, on the question of pith and substance of this pari materia provision, the aforesaid decision of the Supreme Court gets squarely attracted and indicates that such tax imposed by the State Legislature as purchase tax would be genuine purchase tax. But even apart from this, there are two direct decisions of the Kerala High Court rendered in the context of the very same question of legislative competence of the State Legislature under entry 54 of the State List and dealing with the pari materia provision like section 15B. In Malabar Fruit Products Company v. Sales Tax Officer [1972] 30 STC 537, a learned single Judge of the Kerala High Court (P. Subramonian Poti, J., as he then was) dealt with an identical question in connection with section 5-A of the Kerala General Sales Tax Act, 1963. It provided as under :

"Every dealer who in the course of his business purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under section 5, and either (a) consumes such goods in the manufacture of other goods for sale or otherwise, shall .... pay tax ....."

71. The argument that such tax imposed user tax and, therefore, was outside the legislative competence of the State Legislature was repelled by P. Subramonian Poti, J., placing reliance on the Constitution Bench decision of the Supreme Court in [1968] 21 STC 212 (Andhra Sugars Ltd. v. State of Andhra Pradesh). In para 5 of the Report, the learned Judge, interpreting the aforesaid pari materia provision, observed as under :

72. In the scheme of the section, it goes without saying that the purchase by the dealer who is taxes under the section becomes taxable in his hands only if the goods are consumed or disposed of in any manner other than by way of sale or despatch to places outside the State otherwise than as a result of inter-State purchases. These are all subsequent events and, therefore, the time at which tax is imposed is postponed to the happening of subsequent events, but by the very fact of purchase the dealer becomes liable to pay tax on the purchase. It depends upon subsequent contingencies and tax becomes payable when the event mentioned in the section happens."

73. The contention that it was user tax was repelled by placing reliance on the observations of the Supreme Court in Andhra Sugars case [1968] 21 STC 212, to the effect that taxing event is purchase of goods and not use or enjoyment of what is purchased. This decision was upheld by the Division Bench of the Kerala High Court in Yusuf Shabeer v. State of Kerala [1973] 32 STC 359. It would be appropriate to note that the aforesaid two decisions of the Kerala High Court were rendered at the time entry 92B of the Union List was not inserted as per Forty-sixth Constitution Amendment and on the language of that section, the court was concerned with the short question as to what was the taxable event and the taxable event was found to be one of purchase of raw material. The submission of the learned advocates for the petitioners that the view of the Kerala High Court would not stand in the light of the Supreme Court decision in Goodyear case [1990] 76 STC 71 and the judicial dictionary, about taxing event as laid down therein also cannot be accepted as we have already discussed earlier that in Goodyear case [1990] 76 STC 71 the Supreme Court was concerned with the situation where the taxable event covered an entirely different set of commodities which had emerged after manufacturing process which had exhausted the inputs and the despatch of such manufactured goods outside the State was the taxable event. As such is not the provision in section 15B in the present case, or in pari materia provision of the Kerala Act, the decision of the Kerala High Court on pari materia provision would get squarely attracted to the facts of the present case. Following the said decision, therefore, the conclusion becomes inescapable that section 15B does not impose user tax but only imposes genuine purchase tax. It is also pertinent to note that the aforesaid two decisions of the Kerala High Court in so far as they construed the relevant provisions of the Kerala Act, were referred to with approval by the Supreme Court in [1975] 36 STC 191 (State of Tamil Nadu v. Kandaswami) wherein also, the pari materia provision of the Tamil Nadu Act was construed by the Supreme Court. In view of this settled legal position and in the light of the express language of section 15B, therefore, it has to be held that the section imposes purchase tax and not user tax as contended by the learned advocates of the petitioners.

74. We may now briefly refer to certain decisions on which reliance was placed by the learned advocates for the petitioners in support of their contentions that section imposes user tax. In Jiyajeerao Cotton Mills Ltd. v. State of Madhya Pradesh AIR 1963 SC 414, the Supreme Court was concerned with the question about tax on consumption of electricity. Such tax would squarely fall under entry 53 of the State List and it was upheld as such. The said decision is of no assistance to the petitioners. Similarly, the decision in Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC); AIR 1967 SC 1895 instead of supporting the petitioner goes against them, as in that case, the Supreme Court in terms held that tax on purchase of raw materials for use as inputs in the manufacturing process would be covered by entry 54 of the State List and would not be excise. Our attention was also invited to the decision in Commissioner of Sales Tax v. N. L. Mehta [1986] 61 STC 362. In that case, the Bombay High Court was not concerned with the legislative competence of the State Legislature in enacting section 13 of the Bombay Sales Tax Act, 1959. The only short question before the High Court was as to whether a dealer who was a builder and who purchased sand which was taxable commodity and who utilised the same in the manufacturing process by mixing it with cement and produced concrete mixture can be said to have manufactured any commercial commodity out of sand. If he had produced commercial commodity, he could be said to be covered by net of section 13 imposing purchase tax but if the answer was in the negative, charge under the section would not get attracted quo such dealer. The High Court found that even though sand which was a taxable commodity was purchased by the builder and he had mixed it with cement to produce concrete mixture, as concrete mixture was not a commercial commodity, it cannot be said that the dealer had manufactured any commercial commodity which would make him liable to pay purchase tax under section 13. It is difficult to appreciate how this judgment can be of any assistance for deciding the present question whether tax imposed by section 15B is user tax or purchase tax. As a result of the above discussion, it must be held that in pith and substance, section 15B of the Gujarat Act levies purchase tax and does not impose any user tax that which would take purchase tax out of entry 54 of the State List and would transpose it in the residuary entry 97 of the Union List.

75. But even assuming that it may be stated that to some extent, there is some overstepping and while imposing purchase tax on raw materials as inputs, user of these inputs in the manufacturing process is also brought in focus or tax net by the State Legislature and to that extent there may be trenching or transgression of the field covered by residuary entry 97 of the Union List, even then, it would be merely a marginal, insignificant, peripheral and permissible trenching and it would not invalidate the basic exercise of the State Legislature imposing purchase tax as per section 15B. The learned Advocate-General placed reliance on a series of judgment of the Supreme Court on this point. We may briefly refer to them. In Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102, the Supreme Court was concerned with the question whether the Parliament was competent to impose expenditure tax under entry 97 of the Union List when incidentally the said provision trenched upon the field covered by entry 62 of the List II which was in the exclusive domain of the State Legislature, being tax on luxury. Upholding the legislative competence of the Parliament in enacting Expenditure Tax Act, the Constitution Bench of the Supreme Court speaking through Venkatachaliah, J., laid down the following propositions :

"(i) Wherever legislative powers are distributed between the Union and the States, situations may arise where the two legislative fields might apparently overlap. It is the duty of the courts, however difficult it may be, to ascertain to what degree and to what extent, the authority to deal with matters falling within these classes of subjects exists in each Legislature and to define, in the particular case before them, the limits of the respective powers. It could not have been the intention that a conflict should exist; and in order to prevent such a result the two provisions must be read together, and the language of one interpreted, and where necessary modified, by that of the other.

(ii) The law 'with respect to' a subject might incidentally 'affect' another subject in some way; but that is not the same thing as the law being on the latter subject. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does to detract from the distinctiveness of the aspects.

(iii) It is trite that the true nature and character of the legislation must be determined with reference to the power of the Legislature. The consequences and effects of the legislation are not the same thing as the legislative subject-matter. It is the true nature and character of the legislation and not its ultimate economic result that matters."

76. In State of Karnataka v. Ranganatha Reddy AIR 1978 SC 215, another Constitution Bench of the Supreme Court was concerned with the question whether Karnataka Contract Carriages (Acquisition) Act was invalid inasmuch as it trespassed on item No. 42 of List I which gave exclusive power to the Parliament to enact in connection with inter-State trade and commerce. Answering this question against the petitioners and in favour of the State of Karnataka, the Constitution Bench laid down as under :

"The pith and substances of the Act has to be looked into and an incidental trespass would not invalidate the law. Karnataka Contract Carriages (Acquisition) Act is not an Act which deals with any inter-State trade and commerce. Even assuming that carriage of passengers from one State of the other is in one sense a part of the inter-State trade and commerce, the impugned Act is not one which seeks to legislative in regard to the said topic. Primarily and almost wholly it is an Act to provide for the acquisition of contract carriages, the inter-State permits and the other properties situated in the State of Karnataka. In pith and substance it is an Act of that kind. The incidental encroachment on the topic of inter-State trade and commerce, even assuming there is some, cannot invalidate the Act."

77. We may also refer to another decision of the Supreme Court in R. S. Joshi, Sales Tax Officer v. Ajit Mills Ltd. [1977] 40 STC 497 (SC); AIR 1977 SC 2279. In that case, the Supreme Court was concerned with the Gujarat Sales Tax Act itself. The question was whether sections 37(1)(a) and 46(2) of the Bombay Sales Tax Act, 1959, were ultra vires the power of the State Legislature under entries 54 and 64 of the List II. By the impugned provisions, it was laid down that in a case where a dealer purported to collect sales tax from purchasers when such levy was not legally permissible, the amount so collected shall be forfeited to the State (sic) amount of penalty. It was contended that such type of confiscatory provision was beyond entries 54 and 64 of the State List and it was a colourable legislation. This High Court upheld this contention. Allowing the appeal of the State of Gujarat, the Constitution Bench of the Supreme Court speaking through Krishna Iyer, J., held that in pith and substance, the provisions fell within entries 54 and 64 of the State List and when the Stage legislation had legislative competence to legislate on the topics, ancillary and incidental powers flowing from such legislative powers inhered in the State Legislature. The following pertinent observations made by Krishna Iyer, J., speaking for the Supreme Court are required to be noted in this behalf :

"...... the true key to constitutional construction is to view the equity of the statute and sense the social mission of the law, language permitting, against the triune facets of justice highlighted in the Preamble to the Paramount Parchment, read with a spacious signification of the listed entries concerned. If this programme is fed into the judicial cerebration with the presumption of constitutionality superadded, the result would tell whether the measure is ultra vires or not. The doctrine of ancillary and incidental powers is also embraced within this scheme of interpretation."

78. It is, therefore, obvious that even if while mainly levying purchase tax on raw materials, purchased within the State by the manufacture/dealer, if section 15B marginally entrenches on entry 97 of the Union List by way of side effect of imposing tax on user of such materials as inputs, still in pith any substance, the provision remains in the domain of purchase tax covered by entry 54 of the State List and such marginal and peripheral entrenchment or trespass would be permissible to the State Legislature as exercise of ancillary power emanating from the main taxing power flowing from entry 54 and would remain in the realm of permissible legislative exercise and would not invalidate the taxing provision. Consequently, even the last argument mounted by the learned advocates for the petitioners on the legislative competence of the State Legislature while enacting section 15B also fails.

79. These were the only challenges mounted for invalidating this section on the anvil of legislative competence and as they fail, the inevitable result is that the section has to be held to be within the legislative competence of the State Legislature and has to be upheld. Point No. I will stand answered in the affirmative.

80. Point No. II : As point No. I is answered in the affirmative point No. II does not survive.

81. Point No. III : The learned advocates for the petitioners submitted that even assuming that section 15B is within the legislative competence of the State Legislature, in the absence of similar provision like section 4(2) of the Gujarat Sales Tax (Amendment) Act, 1990 validating the assessments made and levies effect under the repealed earlier provision of section 15B which is replaced by the present provision of section 15B, the old assessments and levies would not survive. This contention was tried to be met by the learned Advocate-General for the respondents by submitting that when old provision was repealed and, new provision was enacted with retrospective effect, necessary legal effect has to be given to such retrospective enactment of the new provision from 1st April, 1986 and consequently, all the earlier Acts would be deemed to have been done under the new provision which is deemed to be existing all throughout from 1st April, 1986, on the statute book and as no judgment of any High Court had struck down old section 15B, there was no occasion to enact any validating provision validating the past acts notwithstanding any judgment or order of any court. It was next submitted, placing reliance on section 9 of the Bombay General Clauses Act, 1904, that when old section 15B was repealed and was re-enacted in modified form by the present section 15B, reference as made to the earlier repealed provision that in any instrument including order of assessment by authorities would be treated to be reference to the present re-enacted provision of section 15B. It was also submitted that in fairness to the assessees, if any more tax is leviable under section 15B as re-enacted with retrospective effect as compared to the tax which was levied on them under the old section, as rule 42E is not and cannot be enacted with retrospective effect, the Commissioner of Sales Tax in exercise of his power under section 55 would permit such extra levy and all assessees assessed earlier and who may be assessed under section 15B now, will be treated alike and there would be no discrimination between them.

82. We find considerable force in the aforesaid contention of the learned Advocate-General. It has to be kept in view that old section 15B though challenged earlier before this Court was not struck down by this Court. Before that could happen, the State Legislature itself repealed the said provision and the old provision was clearly hit by the decision of the Supreme Court in Goodyear case [1990] 76 STC 71. But having done so, the Legislature in exercise of its paramount legislative power enacted present section 15B with retrospective effect from 1st April, 1986. This is made very clear by section 2 of the Amending Act 6 of 1990 which provides that in the Gujarat Sales Tax Act, 1969, the following section shall be and shall be deemed to have been substituted, with effect on and from the 1st April, 1986, namely, section 15B. Result is that from 1st April, 1986, onwards, new section 15B is deemed to be on the statute book and written with the same pen and ink. This deeming provision has to be given its full effect as laid down by the Supreme Court in Maharashtra State Textile Corporation Ltd. v. Official Liquidator AIR 1978 SC 476. Therefore, all earlier orders passed by the taxing authorities under the old provision will have to be judged in the light of the new provision of section 15B. There is no occasion for the State Legislature to enact express provision for validating past act as no court had struck down earlier section 15B. As old section 15B is repealed and replaced by new section 15B with retrospective effect, reference made in all old assessment orders to old section 15B which is repealed and replaced by present section 15B, will have to be treated to be reference to newly enacted section 15B which is deemed to be operative in this behalf by force of section 42) of the Amending Act. This effect also clearly flows from section 9 of the Bombay General Clauses Act, 1904 which in term lays down that -

"Where this Act, or any Bombay Act or Gujarat Act made after the commencement of this Act, repeals and re-enacts, with or without modification, any provision of a former enactment, then reference in any other enactment or in any instrument to the provision so repealed, shall, unless a different intention appears be construed as reference to the provision so re-enacted."

83. We do not find any contrary intention in the Amending Act 6 of 1990. Hence, reference made to old section 15B in any assessment order can be said to be reference made to new section 15B in an instrument as it is well-settled by decision of the Supreme Court that the term "instrument" as employed in the General Clauses Act and even otherwise, can cover in its sweep any written document including even a judicial order (Mohan Chowdhury v. Chief Commissioner AIR 1964 SC 173 and Purushottam H. Judye v. V. B. Potedar AIR 1966 SC 856). Consequently, it must be held that despite non-enactment of any express validating provision, the actions taken and assessments made under the repealed provision of old section 15B will be treated to have been done under the newly enacted section 15B with retrospective effect. As new section 15B operates retrospectively from 1st April, 1986, while rule 42E which dilutes its rigour and impact operates prospectively from the date of the enactment a situation may arise where taxing authorities can legitimately demand more tax from the concerned tax-payers on account of wider net of new section 15B de hors rule 42E. But this apprehension on the part part of the assessees gets nullified on account of the statement made by the learned Advocate-General for the State authorities that under past assessments under the old provision of section 15B which would be now deemed to be under the new provision of section 15B, no additional purchase tax could be levied and such additional coverage or charge would be remitted under section 55 of the Act by the Commissioner of Sales Tax and that old assessees and new assessees will be treated at part and will be uniformly governed by section 15B as existing today read with rule 42E. As a result of aforesaid discussion, there would remain no occasion to give any relief to the concerned petitioners on the supposition that validating provision of section 4(2) would not sustain all earlier actions, all taxes paid and all assessments made under old section 15B, as in our view, even de hors section 4(2) of the Act, the aforesaid actions can be well sustained. Point No. III is answered accordingly in the affirmative.

84. Point No. IV : As point No. III is answered in the affirmative, there remains no question of giving any relief to the petitioners. Hence, we have not thought it fit to hear the parties on the question whether the petitioners would be entitled to any reliefs on the supposition that the provisions are ultra vires or even otherwise they are entitled to any reliefs or whether they are not entitled to any reliefs on the ground of unjust enrichment as according to the respondents, they have passed on the tax burden to consumers as the burden of purchase tax paid by them for all these years had entered the cost structure of the concerned manufacturer/dealer and which in its turn got reflected in escalation of sale price charged from the concerned wholesalers who purchase such commodities and who ultimately pass on the burden to the ultimate consumers. The learned Advocate-General wanted to submit that on the principle of unjust enrichment and even on the ground of limitation. Such reliefs cannot be granted, even though they would have succeeded on the main challenge while the learned advocates for the petitioners submitted to the contrary and stated that there was no question of unjust enrichment or limitation and they would have been entitled to refund. As this question does not survive for our consideration, we have not heard the parties on this aspects, as on the main contention, the petitioners have failed before us. On point No. IV, therefore, it is held that in view of our finding on point No. III, the petitioners are not entitled to any relief and their petitions are liable to fail.

85. In the result, these petitions fail and are dismissed. Rules issued in these petitions are discharged. There will be no order as to costs in each one of them.

G.N. Ray, C.J.

86. I have read the judgment delivered today by my learned brother. He has elaborately dealt with the individual arguments advanced by the learned counsel appearing in these groups of cases, where vires of section 15B of the Gujarat Sales Tax Act, 1969, as amended by the Gujarat Act No. 6 of 1990 [Gujarat Sales Tax (Amendment) Act, 1990] are under challenge; and I concur with the decision of my learned brother. Initially, I had some doubts as to whether or not section 15B of the Gujarat Sales Tax Act is essentially a tax on user of taxable goods but on further consideration, I agree with my learned brother that section 15B imposes tax on purchase and it is neither a tax on use or consignment nor a duty on finished product pertaining the character of excise duty. While concurring with the decision of my learned brother, I intend to add the follows :

87. In considering a case of legislative competence of a taxing statute, the law on the subject has now been well-settled by the decisions of various High Courts in India and also the Supreme Court of India, and English courts. It will be only profitable if such settled principles of law ar enumerated before taking into consideration the disputes raised in the instant case.

88. In construing a taxing statute for deciding the question of legislative competence, one must bear in mind that the Constitution is to be construed not in a narrow or pedantic sense and it is to be construed not as mere law, but as the machinery by which laws are to be made. Such interpretation should be made broadly and liberally. It is also well-settled that a reasonable construction of the taxing statute should be followed and literal constitution may be avoided if that defeats the manifest purpose and object of the statute. [1990] 76 STC 71 (SC) (Goodyear India Ltd. v. State of Haryana), [1938] 1 STC 1 (FC) (In re : Central Provinces and Berar Sales of motor Spirit and Lubricants Taxation Act, 1938). The entries in the Constitution only demarcate the legislative fields of the respective Legislatures and do not confer legislative powers as such. [1990] 76 STC 71 (SC) (Goodyear India Ltd. v. State of Haryana), [1971] 81 ITR 763 (SC) (Commissioner of Wealth-tax v. Kripashanker Dayashanker Worahi [1942] 10 ITR Suppl. 121 (HL) (Income-tax Commissioner for City of London v. Gibbs).

89. In interpreting the taxing statute, the main object of which is to plug leakage and prevent evasion of tax, construction, which would defeat its purpose and in effect obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves is workability and efficacy is to be preferred to the one which would render it otiose or sterile. [1975] 36 STC 191 (SC) (State of Tamil Nadu v. Kandaswami), [1990] 76 STC 71 (SC) (Goodyear India Ltd. v. State of Haryana).

90. The law with respect to a subject might incidentally affect another subject in some way but that is not the same thing as the law being on the latter subject. There might be overlapping. But the overlapping must be ignored. The same thing may involve two or more taxable events in its different aspects, but the fact that there is overlapping does not detract from the distinctiveness of the aspects. The true nature and character of the legislation must be determined with reference to the power of the Legislature. The consequences and effects of the legislation are not the same thing as the legislative subject-matter. It is the true nature and character of the legislation and not its ultimate economic result that matters. Nomenclature of an Act is not conclusive and for determining the true nature and character of a particular tax with reference to the legislative competence, one should look into its pith and substance. It is well-settled that while determining the nature of tax, though the standard or measure on which the tax is levied may be a relevant consideration, it is not a conclusive consideration. Its pith and substance will only determine the category into which it will fall [1989] 74 STC 102 (SC) (Federation of Hotel & Restaurant Association of India v. Union of India), [1990] 76 STC 71 (SC) (Goodyear India Ltd. v. State of Haryana), [1945] 1 STC 135 (PC); AIR 1945 PC 98 (Governor-General in Council v. Province of Madras), AIR 1980 SC 1088 (R.R. Engineering Co. v. Zila Parishad), (1936) AC 352 (PC) [In re : A reference under the Government of Ireland Act, 1920, section 51 and section 3 of the Finance Act (Northern Ireland), 1934], [1965] 56 ITR 198 (SC) (Navnit Lal C. Javeri v. K. K. Sen, Appellate Assistant Commissioner of Income-tax).

91. It is now well-settled that taxing statutes are, though not outside article 14, having regard to the wide variety of diverse economic criteria that go into the formulation of its fiscal policy, the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matters, events, etc., for taxation. The tests of vice of discrimination in a taxing law are less rigorous. In examining the allegations of a hostile discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of the Supreme Court had permitted the Legislature to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. But, with all these latitude, certain irreducible consideration of equality shall govern the classification for differential treatment in taxation laws as well. The differentia must have a rational nexus with the object sought to be achieved by the law. The test could only be one of palpable arbitrariness applied in the context of felt needs of the times and societal exigencies informed by experience. There cannot be any precise or set formulate or doctrinaire tests or precise scientific principles of exclusion or inclusion. [1989] 74 STC 102 (SC) (Federation of Hotel & Restaurant Association of India v. Union of India).

92. It is not permissible to construe a fiscal provision by making assumption and presumptions. [1990] 76 STC 71 (SC) (Goodyear India Ltd. v. State of Haryana), [1961] 12 STC 182 (SC) (Commissioner of Sales Tax v. Modi Sugar Mills Ltd.), AIR 1971 SC 378 [Baidyanath Ayurved Bhawan (Pvt.) Ltd. v. Excise Commissioner].

93. Ordinarily, subordinate legislation made under the statute cannot be referred to for the purpose of construing a provision in the statute itself unless it is so to have the effect as if enacted in the statute. When a statute does not contain such a provision, it is clear that subordinate legislation cannot alter or vary the meaning of the statute even if the meaning is ambiguous. (Halsbury's Laws of England, 3rd Edition, Volume 36, page 401).

94. In determining the limits of the weight and amplitude of the "freedom" guaranteed by article 301, a rational and workable test to apply would be - Does the impugned restriction affect directly or indirectly trade on its movement ? It is this free movement of trade from one part to another part of the country that is to be saved. [1961] 1 SCR 809; AIR 1961 SC 232 (Atiabari Tea Co. Ltd. v. State of Assam), [1963] 1 SCR 491; AIR 1962 SC 1406 [Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan].

95. In construing whether a particular tax is a tax on sale or purchase, it is necessary to determine whether the transaction is one of "sale of goods" as known to law and in construing the character of sale or purchase, it is necessary to determine the true character of the transaction involved and not the point of time at which the duty becomes leviable. "Disposal" means "transfer of title in the goods to any other person"; and, therefore, it would not include mere despatch to one's own self or to one's agents or branch offices or depots. Plainly a tax levied on sale must be, in the nature of things, a tax on the sale by the manufacturer when manufacturing process takes place, or on the producer but it is always levied upon him qua seller and not quo manufacturer. [1961] 12 STC 429 (SC); AIR 1961 SC 1534 (J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh). Purchase and sale are two sides of one coin and if no sale has taken place in law, the occasion of purchase can never happen. The sale or purchase, as the case may be, of goods results in change of ownership from one person to another. That must, by its very nature, be a bilateral transaction, with the seller on the one hand and the purchaser on the other. It is only when there is a contract, to which both are parties, that there can be sale or purchase. [1968] 21 STC 212 (SC) (Andhra Sugars Ltd. v. State of Andhra Pradesh).

96. Where the transaction is one of "sale of goods", as known to law, the power of the State to impose tax thereon is plenary and unrestricted subject only to the limitation which the Constitution may impose. [1958] 9 STC 353 (SC); AIR 1958 SC 560 [State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd.].

97. There is a fine distinction between tax on the sale of goods and the tax on the goods themselves. The essence of a tax on goods manufactured or purchased is that the right to levy it accrues by virtue of their manufacture or production. It is immaterial whether the goods are actually sold or consumed by the owner or even destroyed before that can be used. A duty on sale of goods cannot come into existence before the time of sale and it cannot also be levied if the goods are not sold. The power to tax sale of goods is also distinct from any right to impose tax on use or consumption. It cannot be exercised at the earlier stage of import or manufacture or production nor at the later stage of user or consumption, but the power to tax sale of goods can be exercised only at the stage of sale. The successive stages of manufacture or production, sale, use or consumption are separate and it is permissible to impose duty at any of these stages. If duty is imposed on the goods manufactured or produced when issued from the manufactory, then the duty becomes leviable independent of the purpose for which they leave it and irrespective of what happens thereafter. [1938] 1 STC 1 (FC) (In re : Central Provinces and Berar Sales of Motor Spirit and Lubricant Taxation Act, 1938).

98. Taxable event is that occurrence of which creates or attracts liability to tax. Such liability does not exist or occur at any earlier or later point of time. The identification of the subject-matter of a tax is to be found in the charging section. In appreciating whether the tax is imposed on the purchase or sale, it is to be ascertained the true character of the taxable event. It is one thing to levy a purchase tax where the character of goods in respect of which the tax is levied is described in a particular manner and in a case where tax though described in a particular nomenclature actually becomes effective with reference to a totally different class of goods and that too on happening of an event unrelated to the purchase or sale of the commodity. [1990] 76 STC 71 (Goodyear India Ltd. v. State of Haryana). It is to be carefully ascertained as to whether or not ultimately the taxable event is one the sale or purchase of the goods which may be but to use in the manufacturing process but not on the user of such goods in such process and the tax is really not imposed on the final product. One must read the words in the context of the Act as a whole in construing the true nature and character of the taxing statute. The general rule in construing any document is that one should put oneself in the shoes of the maker or makers and take into account the relevant facts known to them when the document was made. [1990] 76 STC 71 (Goodyear India Ltd. v. State of Haryana), [1975] 1 All ER 810 (HL) (Black-Clawson International Ltd. v. Papierwerke

Weldhof-Aschaffenburg).

99. In the backdrop of the aforesaid principles enumerated in various decisions of the High Courts and the Supreme Court and English courts referred to hereinabove, the exercise should be made to determine as to whether or not section 15B of the Gujarat Sales Tax Act, as amended is beyond the legislative competence inasmuch as it does to come within the purview and ambit of entry 54 of List II of the Seventh Schedule to the Constitution. Even if it may fall within the ambit of entry 54 of List II, it is also necessary to determine whether the same offends article 14 and/or offends article 301 of the Constitution. It has been very strongly contended by the learned counsel appearing for the writ petitioners that for a proper appreciation of the true nature and character of section 15B, section 15B must be read along with rule 42E of the Sales Tax Rules framed under the Act. It has been very strongly contended that the liability under the Sales Tax Act must be determined with reference to the Act and the Rules and notifications issued thereunder. It has been contended that if section 15B is read along with rule 42E, it will be quite evident that the tax is not on the sale or purchase of the goods but is imposed either for use of taxable goods in the manufacturing process of such goods or on the despatch of such goods after the manufacturing process. It is also possible, according to some of the learned counsel, to construe section 15B read with rule 42E that a tax has been sought to be imposed ultimately on the goods so manufactured and it is thus really in the nature of excise duty. The learned Advocate-General has very strongly contended that in deciding the question of legislative competence, the section itself should be construed. If the section, on its own without the aid of the rules or notifications is workable and does not go beyond the parameters of entry 54 of List II of the Seventh Schedule, the section does not become ultra vires for want of legislative competence. It is immaterial to consider what should be the effect of the incidence of tax and the burden on the tax-payer because of the additional tax sought to be imposed under section 15B. Such consideration is not at all germane for considering the question of legislative competence vis-a-vis entry 54 of List II of the Seventh Schedule to the Constitution. He has contended that there is no doubt that the liability under the Sales Tax Act should ultimately depend not only on the section itself, but on the cumulative effect of the Act and Rules and notifications issued thereunder, but in deciding the case of legislative competence, the ultimate liability under the Gujarat Sales Tax Act read with the Rules and notifications is not at all a relevant consideration. He has submitted that the rule made under a delegated authority under the Act cannot be taken into consideration for the purpose of determining the legislative competence. He has contended that the provisions of an Act do not get sustenance from the Rules framed thereunder, but the Rules so framed get sustenance under the Act. The aforesaid submission of the learned Advocate-General must be accepted because such submission is based on well accepted principles of law since enumerated hereinbefore. It is permissible to describe the taxable events by giving descriptions of the goods or events on which sale or purchase tax is imposed and it is necessary to determine the taxable event in the context of description of the goods and/or events. There is no manner of doubt that the Legislature of the State is not competent to impose a tax, which does not arise on the occasion of the sale, but is made to depend upon subsequent consumption and use of the goods or on the end-products. In such cases, the tax must be a tax other than sales tax, and, therefore, beyond the entry 54 of List II of the Seventh Schedule to the Constitution. It should, however, be remembered that although sales tax is a tax imposed on the occasion of the sale of goods, it has no reference to the point of time at which the sale or purchase takes place. Although in section 15B, tax is sought to be imposed on goods intended to be used in the process of manufacture and actually put to use for such manufacturing process, the tax taxable event is not dependent on completion of such manufacturing process by which a finished product is obtained. Even if the goods used in such manufacturing process still remain intermediate goods requiring further manufacturing process for a finished product capable of ultimate consumption as an end-product, additional tax under section 15B can be imposed on the goods so used in the manufacturing process. It is not necessary to take into consideration the burden of taxation under section 15B in the absence of the provisions in the Rules or notifications and ultimate effect of exemption or set-off of the liability of additional tax under section 15B as envisaged in rule 42E. For upholding legislative competence, it will be sufficient to hold that by itself. Section 15B imposes additional tax on purchase and such tax is not on the user of the goods or on the consignment or despatch of the goods as in the case of other statutes. A taxable event under section 15B is not the same taxable event as in section 13AA of the Bombay Sales Tax Act or the West Bengal sales tax statutes referred to by the learned counsel for the petitioners. It may also be noted here that there is a distinction between the impugned provisions in Bombay and West Bengal taxation statutes and section 15B of Gujarat Sales Tax Act. In considering the vires of the impugned provisions of the Bombay Act (section 13AA) and of the West Bengal statutes [section 4(6)(ii) of Bengal Finance (Sales Tax) Act and section 4(1)(i) of West Bengal Sales Tax Act], the impugned sections themselves had been interpreted, but for considering the vires of section 15B of the Gujarat Sales Tax Act on the score of legislative incompetence, attempt has been made to interpret the said section with the aid of rule 42E of the Gujarat Sales Tax Rules. It has already been indicated that such attempt to interpret the section on the scope of legislative competence is not permissible. It, therefore, cannot be argued that section 15B as amended is outside the scope and ambit of entry 54 of List II of the Seventh Schedule to the Constitution. The Legislature has, therefore, the competence to enact the said section 15B. Mr. Pathak, learned counsel appearing for some of the petitioners, has contended that section 15B should be struck down as arbitrary and a piece of legislation in terrorem. I have already indicated that law has been well-settled by the Supreme Court in the case of Federation of Hotels & Restaurant Association of India [1989] 74 STC 102 that although taxing statutes are not outside article 14 of the Constitution, but having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, the Legislature enjoys a wide latitude in the matter of selection of persons, subject-matters, events, etc., for taxation. The tests of vice of discrimination in a taxing law are less rigorous and in examining the allegations of hostile discriminatory treatment, what is required to be looked into is not its phraseology, but the real effect of its provision. If there is equality and uniformity within each group, the law would not be discriminatory. The decisions of the Supreme Court have permitted the Legislature to exercise extremely wide discretions in classifying the items of tax purposes so long as they refrain from clear and hostile discrimination against a particular person or classes. It has been very clearly indicated by the Supreme Court in the aforesaid decision that the test could only be one of palpable arbitrariness applied in the context of felt needs of the time and societal exigencies informed by experience. Moreover, in deciding the test of vice of arbitrariness or discrimination offending article 14 of the Constitution, the real effect of section 15B must be considered with reference to rule 42E and/or any other provisions of the Act, Rules and notifications thereunder, and if section 15B is considered in the context of the said rule 42E, it is quite apparent that no arbitrariness or unreasonableness can be found in the operation of section 15B in the matter of imposition of additional tax and ultimate tax liability is also reasonable. There has not been any hostile discrimination palpably against any class or group of persons and every one in the same group has been subjected to one common treatment.

100. The challenge to vires of section 15B on the ground that it infringes article 301 of the Constitution cannot also succeed. Section 15B does not in any way impose restriction on trade or movement of goods. It is to be remembered that incidence of tax varies from State to State and degree of taxation under the relevant sales tax laws in different States is also different. On that score, it cannot be reasonably contended that simply because the extent of the limits of taxation are comparatively higher in a particular State and more goods have been brought within the fold of legislation for imposing sales tax or additional tax on sale or purchase, such imposition of tax offends the right to free movement of trade or right under the free movement of goods in inter-State transaction. In considering the case of restriction on inter-State trade or transactions as contemplated under article 301 of the Constitution, it is only necessary to consider whether any restriction directly and not remotely has been brought about on the free movement of goods and trade and not the quantum and degree of taxation in the State imposed on various articles. Viewed from this aspect, section 15B cannot be held to have offended article 301 of the Constitution.

101. In the result, all the special civil applications must fail and accordingly, they are dismissed with no order as to costs.

102. Petitions dismissed.