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  • Hon'ble Mr. Justice Baharul Islam
  • Hon'ble Mr. Chief Justice C. M. Lodha
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  • Hon'ble Mr. Justice Baharul Islam
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Smart Summary

Structured Summary of the Opinion (C.M. Lodha, C.J.)

Factual and Procedural Background

This is a petition under article 226 of the Constitution of India seeking cancellation of Notification No. FTX. 98/62/84 (annexure C) and a direction restraining the opposite parties from enforcing it against the petitioner. The petitioner also sought refund of Rs. 49,048.97 paid as sales tax up to 31 March 1970.

The petitioner is a registered dealer trading in onions, garlics, potatoes, etc., at Fancy Bazar, Gauhati, and imports onions from outside the State of Assam. The challenge concerns the inclusion of “onion” within an entry in the impugned schedule (item No. 56) and the levy of sales tax on imported onions.

Item No. 56 originally read: “Dried fruits, bulbs and plants excluding orchids. 5 paise in the rupee.” By Act No. 18 of 1967 (effective 25 October 1967) the item was amended by inserting the words “including onions and garlics” after “bulbs”.

Legal Issues Presented

  1. Whether the impugned schedule entry (item No. 56) as amended — expressly including onions and garlics — permits levy of sales tax on onions imported into Assam and on onions produced in Assam.
  2. Whether “onion” falls within the statutory term “bulb” (and hence within item No. 56) or, alternatively, whether onions are exempt because they are not “manufactured, made or processed” within the meaning of the Assam Finance (Sales Tax) Act, 1956.
  3. Whether the levy of sales tax on onions imported from other States is discriminatory vis-à-vis onions produced in Assam and therefore violative of article 301 of the Constitution (and whether article 304(a) can justify the levy).
  4. Whether the petitioner is entitled to a refund of the sales tax of Rs. 49,048.97 paid under protest.

Arguments of the Parties

Petitioner's Arguments

  • “Onion” does not fall within the meaning of the word “bulb” (relied in part on dictionary meanings), and therefore is not taxable under item No. 56 as originally worded.
  • Onions grown in Assam are not “manufactured, made or processed”; therefore a person selling Assam-grown onions is not a “dealer” in relation to those goods under section 2(2) of the Act, and cannot be taxed; taxing imported onions but not Assam-grown onions is discriminatory and breaches article 301.
  • Article 304(a) cannot justify the levy because it permits taxation of imports only to the extent goods produced in the State are similarly taxed; the petitioner contends they are not similarly taxed.
  • The petitioner relied on several authorities (cases) supporting the proposition that discriminatory taxation between goods produced in-state and those imported is impermissible under the Constitution.

State's Arguments

  • By reply (para 3) the State unequivocally asserted that onions produced in Assam are equally subject to sales tax as onions imported from outside Assam; this factual position was not contested by the petitioner.
  • The State pointed to the statutory amendment expressly including “onions and garlics” within item No. 56 and relied on definitions and statutory schedules (including Schedule III and section 7) showing that onion/garlic/spices/condiments are treated distinctly from “vegetables”.
  • The State contended that the word “processed” in the statute covers the ordinary treatment undergone by onions (drying, removing leaves, preparing for market), and thus onions produced in Assam are “processed” and taxable.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
State of Madhya Pradesh v. Bhailal Bhai [1964] 15 S.T.C 450 S.C; A.I.R. 1964 S.C. 1006 Cited by petitioner to support the proposition that a levy discriminating between goods produced in a State and those imported from another State is hit by article 301. The Court noted the authority was relied upon by the petitioner but stated it was unnecessary to discuss these authorities in detail because the State did not challenge the underlying constitutional proposition; the Court did not rely upon or distinguish this authority further.
Firm A.T.B. Mehtab Majid and Company v. State of Madras [1963] 14 S.T.C 355 S.C; A.I.R. 1963 S.C. 928 Cited by petitioner for the same constitutional proposition regarding discrimination in taxation (article 301). The Court recorded that the case was cited by the petitioner but did not examine it because the State accepted the general proposition and the factual position (that Assam-grown onions are taxed) removed the discrimination issue.
State of Rajasthan v. Ghasiram Mangilal (1969) 2 SCC 710 Cited by petitioner as supporting the constitutional limitation on discriminatory taxation between in-state and imported goods. The Court again observed the authority was cited but did not analyze it further given the accepted factual parity in taxation between Assam-grown and imported onions.
Nilgri Ceylon Tea Co. v. State of Bombay [1959] 10 S.T.C 500 Quoted for the meaning of “process” (Shah, J.'s observations describing “process” as subjecting raw material to treatment for marketability; examples included milling, sorting, repacking, etc.). The Court relied on the definition and examples in this decision (and on dictionary meanings) to conclude that the ordinary post-harvest treatment of onions (drying leaves, exposing to sun, preparing for market) constitutes “processing” within the statutory meaning.

Court's Reasoning and Analysis

The Court proceeded in logical steps, grounded in the factual record and statutory text:

  1. Amendment effect: The Court first observed that item No. 56 had been amended by Act No. 18 of 1967 to expressly insert the words “including onions and garlics” after “bulbs”. Because of that express statutory inclusion, the Court considered it unnecessary to resolve the purely lexical argument whether “onion” falls within a dictionary meaning of “bulb”. The Court therefore proceeded on the basis that onions are included by statute within the relevant entry.
  2. Factual parity on taxation: The State's reply (para 3) asserted that onions produced in Assam are equally taxable with onions imported from outside. The petitioner did not controvert that assertion. The Court accepted that uncontroverted factual assertion and treated it as establishing that there was no factual discrimination in taxation between Assam-grown and imported onions.
  3. Statutory definition of “dealer”: The petitioner had argued from section 2(2) of the Act that a seller of Assam-grown onions would not be a “dealer” because onions are not “manufactured, made or processed”. The Court examined the contention but rejected it on the basis that (a) onions are expressly included in the schedule by amendment and (b) the factual position is that Assam-grown onions are taxed.
  4. Meaning of “process”: The Court examined the meaning of the word “process” using dictionary authorities (Webster, Chambers, Oxford) and the judicial exposition in Nilgri Ceylon Tea Co. v. State of Bombay (Shah, J.). The authorities equate “process” with preparing by treatment for marketability, including examples such as sorting, repacking and other post-harvest treatments.
  5. Application to onions: The Court described the ordinary sequence for onions after harvest — removal from earth, drying of leaves, removal of dried leaves, exposure to sun, and then taking the bulb to market — and held that these ordinary post-harvest treatments constitute “treatment or process”. The Court concluded that onions are therefore “processed” within the meaning of the statute.
  6. Interaction with Schedule III and section 7: The Court noted Schedule III where onion, garlics, spices and condiments are specifically excluded from the term “vegetables” under section 7, reinforcing that the statutory scheme contemplates distinct treatment for onions.
  7. Disposition on discrimination and constitutional challenge: Because the State's pleaded and uncontroverted fact was that Assam-grown onions are equally taxed, the Court found the petitioner’s discrimination argument (under article 301) to be without force. The Court also stated it was unnecessary to discuss at length the authorities cited under articles 301 and 304(a), because the State did not dispute the general legal proposition and the factual parity eradicated the discriminatory complaint.
  8. Conclusion on levy and refund: The Court held the levy on imported onions was justified. Given that conclusion, the Court found the claim for refund unnecessary to entertain and declined to order a refund of the sum paid by the petitioner.

Holding and Implications

Holding: The petition is dismissed. The Court held that the levy of sales tax on onions imported by the petitioner from outside the State of Assam is justified.

Direct implications and consequences:

  • The petitioner's challenge to Notification No. FTX.98/62/84 (annexure C) is rejected and the notification is not cancelled.
  • The petitioner is not entitled to a refund of Rs. 49,048.97 paid as sales tax; the Court considered the refund question to be precluded by its conclusion upholding the levy.
  • The parties are ordered to bear their own costs.

The opinion does not purport to lay down a new broad precedent beyond its application to the facts and statutory provisions before the Court; the Court expressly refrained from extended discussion of the authorities cited under articles 301 and 304(a) because of the State’s acceptance of the constitutional proposition and the uncontested factual parity in taxation.

Disposition: PETITION DISMISSED. Baharul Islam, J. agreed.

Show full summary ...

    Chandreswar Singh v. State Of Assam And Others

    C.M Lodha, C.J:— This is a petition under article 226 of the Constitution of India, whereby it has been prayed that Notification No. FTX. 98/62/84 marked annexure C, be cancelled and the opposite parties may be directed not to enforce it against the petitioner. It has been further prayed that an amount of Rs. 49,048.97 paid by the petitioner as sales tax be ordered to be refunded.

    2. The petitioner deals in onion, garlics, potatoes, etc., in Fancy Bazar of Gauhati and, in the course of his business, imports among other things onions from outside the State of Assam. He is a registered dealer within the meaning of the Assam Finance, (Sales Tax) Act, 1956 (hereinafter to be referred to as the Act) and the Rules framed thereunder. His case is that he had to deposit under protest a sum of Rs. 49,048.97 up to the period ending 31st March, 1970, as sales tax on the onion imported by him from outside the State of Assam. The contention of the petitioner is that, in the first place, “onion” is not a bulb and, at any rate, onion grown within the territory of Assam cannot be subjected to sales tax as it is neither made nor manufactured nor processed and, therefore, the levy of sales tax oil the onion imported by the petitioner from outside the State is discriminatory and liable to be struck down under article 301 of the Constitution. We shall deal with the points raised by the learned counsel for the petitioner in due course. But before we do so, we consider it necessary to point out that the schedule, annexure C, filed by the petitioner along with the petition does not represent the correct State of affairs inasmuch as item No. 56, which is the subject-matter for decision before us, has been amended. In annexure C, item 56 reads as under:

    “56. Dried fruits, bulbs and plants excluding orchids. 5 paise in the rupee.”

    3. In this connection, we may point out that item No. 56 has been amended by insertion of the words “including onions and garlics” after the word “bulbs” and before the word “and” by Act No. 18 of 1967 with effect from 25th October, 1967.

    4. Some argument was advanced in the beginning by the learned counsel that “onion” does not fall within the definition of the term “bulb” and, therefore, onion is not taxable. He also referred to the dictionary meaning of the word “bulb” in this connection. But, in view of the amendment referred to above, we consider it unnecessary to address ourselves to this argument. Irrespective of the fact whether the term “bulb” embraces “onion” within its definition, it is clear from the amended item No. 56 that onion has been expressly included within the term “bulb” and, therefore, so far as the impugned schedule is concerned, we have to proceed on the basis that “onion” is “a bulb” whatsoever may be the dictionary meaning of the word “bulb”.

    5. Now, we may come to the second branch of the learned counsel's argument that the levy of sales tax on the imported onion is bad as it is discriminatory, the onion grown in Assam not being subjected to sales tax. Before examining the legal aspect of the case, we consider it necessary to point out here and now that in the reply filed by the State of Assam, it was asserted in unequivocal terms in para 3 that “onion produced in the State of Assam is equally taxable with onion imported from outside the State of Assam”. This factual position alleged in the reply to the petition has not been controverted on behalf of the petitioner and, therefore, we have no alternative but to accept that as a matter of fact onion produced in the State of Assam does attract the levy of sales tax and factually there is no discrimination so far as the levy of this tax is concerned between the onion produced in Assam and the onion imported from outside the State of Assam. However, the learned counsel was at pains to argue that whatever may be the actual State of affairs, the levy cannot be justified under the law. In this connection he has drawn our attention to the definition of the term “dealer” contained in section 2, sub-section (2), of the Act, which reads as under:

    “(2) ‘Dealer’ means any person who sells taxable goods manufactured, made or processed by him in Assam, or brought by him into Assam from any place outside Assam for the purpose of sale in Assam.”

    6. To put the argument of the learned counsel in nutshell, his contention is that a person who sells onion produced in Assam is not a dealer inasmuch as onion is neither manufactured nor made nor processed. On this assumption, contends the learned counsel, that levy of sales tax on onion imported from outside the State of Assam is hit by article 301 of the Constitution, which deals with freedom of trade, commerce and intercourse throughout the territory of India. It is argued that article 304(a) cannot come to the rescue of the State for justifying this levy inasmuch as article 304(a) provides that the legislature of a State may by law impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced. In support of this contention, the learned counsel has relied on State of Madhya Pradesh v. Bhailal Bhai [1964] 15 S.T.C 450 S.C; A.I.R 1964 S.C 1006., Firm A.T.B Mehtab Majid and Company v. State of Madras [1963] 14 S.T.C 355 S.C; A.I.R 1963 S.C 928. and State of Rajasthan v. Ghasiram Mangilal 1969 2 SCC 710.. On the other hand, Mr. Goswami, learned counsel for the State of Assam, contends that there is no discrimination between onion imported from outside and onion grown in the State of Assam inasmuch as both are subjected to levy of sales tax. The argument in this connection has centred round the definition of the word “processed”. It is urged by the learned counsel for the petitioner that onion cannot be processed inasmuch as it is not subjected to any mechanical process after it has been removed from the earth.

    7. The word “process” used as a transitive word means according to Webster's New International Dictionary “to prepare by or subject to treatment or process”. In Nilgri Ceylon Tea Co. v. State of Bombay [1959] 10 S.T.C 500., Shah, J., as he then was, observed as follows:

    “The expression ‘process’ has not been defined in the Act. According to Webster's Dictionary ‘process’ means to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable form, as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurising, fruits and vegetables by sorting and repacking.”

    8. According to Chambers's Twentieth Century Dictionary, “process”, inter alia, means to prepare, (e, g., agricultural product) for marketing. In the Oxford English Dictionary, Vol. VIII, “process” has been defined to mean besides other things, “to preserve fruit, vegetable, etc., by some process”. In Webster's New International Dictionary, Vol. II, besides other things, process has been defined to mean “a course of procedure, something that occurs in the series of actions”.

    9. Now, it is common knowledge that the onion has its roots under the earth with coats of bulbs also and its leaves sprout on the surface of the earth. It is removed along with the root, the leaves are dried up, and the main part which may be called bulb is exposed in the sunshine and after the leaves have dried up and have been removed from the bulb, the bulb, i.e, the edible round article is taken to the market for sale. From this it will be clear that the commodity is subjected to a treatment or process. It does not remain in the same condition in which it was when embedded to the earth or as initially harvested. Looked at from this angle, we are inclined to hold that onion is processed and that is why the onion grown in the State of Assam has been rightly subjected to a levy of sales tax by the Government.

    10. In this connection, reference may be made to Schedule III of the Act, where amongst the list of goods under section 7 of the Assam Sales Tax Act, it is specifically mentioned that onion, garlics, spices and condiments would not be included within the ambit of the term “vegetables”. We are, therefore, unable to accept the contention advanced by the learned counsel that on account of the wordings contained in the definition of the term “dealer” in the Act, onion produced within the territory of the State of Assam cannot be subjected to sales tax. As observed earlier, it has been stated in the reply and so also it has also been asserted before us by the learned counsel for the State in the course of arguments that the onion produced in the State of Assam has been subjected to levy of sales tax. In this view of the matter, the argument based on alleged discrimination between the onion produced in the State of Assam and that imported from outside loses all its force. At this stage, we may mention that we do not consider it necessary to discuss the authorities cited by the learned counsel for the petitioner based on articles 301 and 304(a) of the Constitution, because the learned counsel for the State has taken no exception to the proposition propounded therein that any levy discriminating between the goods produced in the State and those imported from outside would be hit by article 301 of the Constitution. Besides that, there is no gainsaying the fact that the petitioner is a dealer and therefore the argument raised in this connection that even though the petitioner is a dealer registered under the Act, still he would not be liable to pay sales tax on the sale of onion imported from outside on the ground that the onion produced in the State of Assam does not attract the levy of tax is, in our opinion, unsustainable.

    11. We are, therefore, of the opinion that the levy of sales tax on the onion imported by the petitioner from outside the State of Assam is justified and cannot be struck down. In view of the conclusion to which we have come, the question of refund of the tax already paid by the petitioner does not arise and we consider it wholly unnecessary to refer to the cases relied upon by the learned counsel on both the sides on the question whether refund can be ordered or not. The result is that this petition fails and hereby dismissed. But, in the circumstances of the case, we leave the parties to bear their own costs.

    Baharul Islam, J.:— I agree.

    12. Petition dismissed.

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    Comments

    Chandreswar Singh v. State Of Assam And Others
    (Aug 30, 1978)