Govinda Bhat, J.:— In this writ petition preferred under article 226 of the Constitution of India the petitioner has prayed for the issue of a writ in the nature of prohibition, prohibiting the Deputy Commissioner of Commercial Taxes, Belgaum Division I (respondent No. 1) from proceeding further with the rectification proceedings pursuant to his notice dated 16th February, 1970. The petitioner is a firm carrying on business in Hubli town in Mysore State. It buys cotton seeds in Mysore State and sells the same in the course of inter-State trade or commerce. The petitioner's turnover of sales of cotton seeds effected in the course of inter-State trade or commerce for the period 28th April, 1960, to 20th October, 1960, was assessed to tax by the Commercial Tax Officer, Hubli, under the Central Sales Tax Act, 1956, hereinafter called the Act. Against the said order of assessment, the petitioner preferred an appeal to the 1st respondent, who, by his order dated 26th October, 1965, following the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons [1965] 16 S.T.C 231 S.C. set aside the assessment made by the Commercial Tax Officer. Consequent on the said order, the Commercial Tax Officer refunded to the petitioner the tax collected on the basis of the assessment order which was set aside on appeal.
2. The Act was amended by the Central Sales Tax (Amendment) Ordinance, 1969, which was promulgated by the Vice-President acting as President on 9th June, 1969. The said Ordinance amended the Act with retrospective effect and validated the assessments made earlier. On the basis of the said Ordinance, the Commercial Tax Officer, Hubli, issued a notice of demand dated 25th July, 1969, demanding from the petitioner the payment of the sum of Rs. 1,702.16 being the tax amount that had been refunded to the petitioner. The said notice of demand was challenged by the petitioner before this court in W.P No. 6317 of 1969. This court by its order dated 7th January, 1970, quashed the impugned notice on the ground that without rectification; of the order of the 1st respondent made in the appeal, the Commercial Tax Officer had no right to demand the tax that had been refunded. Liberty was reserved to the 1st respondent to take steps for rectification of his order under rule 38 of the Mysore Sales Tax Rules, 1957, hereinafter called the Rules. The Central Sales Tax (Amendment) Ordinance, 1969, was replaced by the Central Sales Tax (Amendment) Act, 1969 (Act No. 28 of 1969), hereinafter called the Amendment Act, which received the assent of the President on the 30th of August, 1969. The Amendment Act amended sections 6, 8 and 9 of the Act with retrospective effect and validated the assessments made earlier notwithstanding anything contained in any judgment, decree or order of any court or other authority to the contrary. All assessment proceedings taken under the Act are deemed to be taken in accordance with the Act as amended by the Amendment Act.
3. The 1st respondent issued a notice dated 16th February, 1970, under rule 38 of the Rules proposing to rectify his order made in the appeal of the petitioner, and the petitioner was called upon to file objections, if any, within 10 days from the date of receipt of the notice as to why the order dated 26th October, 1965, should not be rectified and the order of the Commercial Tax Officer should not be restored. The said notice marked exhibit 1 reads thus:
“No. Office of the Deputy Commissioner of Commercial Taxes, Belgaum Division I, Dharwar, dated 16-2-1970.
NOTICE
[Under rule 38(1) of the Mysore Sales Tax Rules, 1957]
Please take notice that in your case for the period between 28-4-1960 to 20-10-1960 by applying the decision of the Supreme Court in the case of State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons by the order No. AP/DR/CST/1/63-64 dated 26-10-1965 the order of the Commercial Tax Officer was set aside and the Central sales tax paid was ordered to be refunded.
4. In view of the Central Sales Tax (Amendment) Act (Ordinance), 1969, you are liable to tax on the inter-State sales irrespective of any judgment, decree or order of any court in this country, to the contrary. As such, the order of this office in appeal order No. AP/DR/CST/1/63-64 dated 26-10-1965 needs to be rectified under rule 38 and the original order of the Commercial Tax Officer needs to be confirmed. You are, therefore, required to file objections, if any, within 10 days from the date of receipt of this notice as to why the above appeal order should not be rectified and why the order of the Commercial Tax Officer should not be restored. In case you fail to file objections, the proposed action will be confirmed.
Sd./-(M. Marappa Reddy)
Deputy Commissioner of Commercial Taxes,
Belgaum Division I, Dharwar.
M/s. H. Basappa & Bros., New Cotton Market, Hubli.”
5. On receipt of the said notice, the petitioner preferred the above writ petition on 25th of February, 1970, praying for a writ in the nature of a writ of prohibition. In the affidavit filed in support of the writ petition the petitioner contended that the provisions of rule 38 have not been adopted under the Act and therefore the 1st respondent has no jurisdiction to rectify his order made in the appeal. It was also contended that rule 38 is violative of article 14 of the Constitution of India.
6. During the pendency of the writ petition, the Governor of Mysore promulgated on the 9th day of June, 1970, the Mysore Sales Tax (Amendment) Ordinance, 1970, by which the Mysore Sales Tax Act, 1957, hereinafter called the Mysore Act, was amended and a new section 25A was inserted with retrospective effect. The provisions of the said section 25A are similar to the provisions of rule 38. Proceedings taken under rule 38 are deemed to have been taken or made under section 25A of the Mysore Act. The result of the amendment of the Mysore Act is that the impugned notice issued by the 1st respondent is deemed to have been issued under section 25A of the Mysote Act. Thereafter the petitioner, with the leave of the court; filed a supplementary affidavit urging additional grounds, since the grounds urged against the validity of rule 38 did not survive after the amendment of the Mysore Act. At the stage of hearing, the petitioner's learned counsel, with the leave of the court, raised a ground which is not found in the pleadings, that the amendment in regard to its retrospective operation violates the fundamental rights guaranteed under article 19(1)(f) and (g) of the Constitution of India. That ground has been specifically raised in the connected matter W.P No. 5367 of 1969 which was heard along with this writ petition.
7. At the hearing Sri K. Srinivasan, learned counsel for the petitioner, urged the following five grounds:—
I. That the Amendment Act should be struck down in regard to its retrospective operation on the ground that it violates the fundamental rights guaranteed under article 19(1)(f) and (g) of the Constitution of India.
II. That section 10 of the Amendment Act contravenes article 14 of the Constitution of India since it arbitrarily discriminates against dealers who have effected sales prior to 10th November, 1964, and have not collected any tax under the Act; the said section not being severable from the rest of the provisions, the Amendment Act in regard to its retrospective operation should be struck down as unconstitutional.
III. Section 25A of the Mysore Act has not been adopted by the Act and therefore there is no power under the Act to rectify assessment orders on the ground of any mistake apparent from the record,
IV. That notwithstanding the amendment of the Act by Central Act 28 of 1969, all sales by a dealer in the Mysore State effected in the course of inter-State trade or commerce are exempt from tax by virtue of subsection (2A) of section 8 of the Act.
V. That there is no mistake apparent from the record for the 1st respondent to invoke his powers under section 25A of the Mysore Act.
8. We now proceed to consider the grounds in the above order.
9. Re. Ground No. I.— It was urged that since the period covered by the retrospective amendment of the Act is a long period of over 12 years, it should be held that the restrictions imposed thereunder are unreasonable and so the Amendment Act should be struck down in regard to its retrospective operation on the ground that it violates the fundamental rights guaranteed under article 19(1)(f) and (g) of the Constitution of India.
10. The power to make a law carries with it the power to give retrospective operation to the law. It is settled law that taxing statutes are not immune from challenge on the ground of violation of the fundamental rights guaranteed under articles 14 and 19(1)(f) and (g) of the Constitution of India. Although the Legislature is competent to give retrospective operation to its taxing statutes, the reasonableness of the retrospective operation of the law can be scrutinised by the court. It is conceivable that cases may arise in which the retrospective operation of a taxing statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional; but the test of the length of time covered by the retrospective operation cannot by itself be a decisive test. If the validity of a taxing statute is challenged in court and ultimately the highest court in the land holds that the statute is unconstitutional, the Legislature may amend the Act so as to bring it in conformity with the Constitution with retrospective effect and validate the assessments made under the statute declared as unconstitutional. Occasion may arise for amendment of a taxing statute for curing the defective provisions of a taxing statute which come to light in legal proceedings. A curative Act is generally given retrospective operation. When dealing with curative statutes, the courts have consistently held that the legislative purpose is by itself sufficient to justify the concomitant retroactivity. Under the Bihar Finance Act, 1950, a tax was levied on passengers and goods carried by public service motor vehicles in Bihar. Suits were filed in subordinate courts challenging the validity of the tax; the said suits were withdrawn by the High Court of Patna which dismissed the suits on 8th May, 1952. The plaintiffs preferred appeals to the Supreme Court which allowed the appeals on 12th December, 1960, holding that the Bihar Act was unconstitutional. Then the Bihar Legislature enacted the Bihar Taxation on Passengers and Goods Act, 1961, with retrospective effect from 1st April, 1950. It was contended that the said Act was unreasonable because it was practically impossible to pass on the tax to the passengers from whom it was expected to be collected. In Rai Ramkrishna v. State of Bihar, the Supreme Court held that the mere length of period during which retrospective operation was given to a taxing statute was not by itself enough to invalidate it. The Supreme Court referred to the facts of the case mentioned above and pointed out that 10 years had elapsed between the filing of the suits by the plaintiffs and the conclusion of the proceedings in their favour in the Supreme Court, and it was held that having regard to the facts of the case the restrictions imposed by the retrospective operation of the Bihar Act must be held to be reasonable in the public interest under article 19(5) and (6) of the Constitution. The Supreme Court stated:
“We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. It is conceivable that cases may arise in which the retrospective operation of a taxing or other statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional; but the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test. We may have a statute whose retrospective operation covers a comparatively short period and yet it is possible that the nature of the restriction imposed by it may be of such a character as to introduce a serious infirmity in the retrospective operation. On the other hand, we may get cases where the period covered by the retrospective operation of the statute, though long, will not introduce any such infirmity. Take the case of a Validating Act. If a statute passed by the Legislature is challenged in proceedings before a court and the challenge is ultimately sustained and the statute is struck down, it is not unlikely that the judicial proceedings may occupy a fairly long period and the Legislature may well decide to await the final decision in the said proceedings before it uses its legislative power to cure the alleged infirmity in the earlier Act. In such a case, if after the final judicial verdict is pronounced in the matter the Legislature passes a Validating Act, it may well cover a long period taken by the judicial proceedings in court and yet it would be inappropriate to hold that because the retrospective operation covered a long period, therefore, the restriction imposed by it is unreasonable. That is why we think the test of the length of time covered by the retrospective operation cannot by itself be treated as a decisive test.”
11. In C. Krishna Moorthy v. State of Orissa, the decision in Rai Ramkrishna's case [1963] 50 I.T.R 171 S.C was followed: and it was held that section 2 of the Orissa Sales Tax Validation Act, 1961, was not ultra vires because it withdrew an exemption in respect of gold ornaments retrospectively. This is what the Supreme Court stated in the said decision:
“It is true that in considering the question as to whether legislative power to pass an Act retrospectively has been reasonably exercised or not, it is relevant to enquire how the retrospective operation operates. But it would be difficult to accept the argument that because the retrospective operation may operate harshly in some cases, therefore, the legislation itself is invalid……….”
12. In Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Camatic Co. Ltd. 1969 2 SCC 55 the decision in Rai Ramkrishna's case was again followed in repelling the challenge made to the Madras Urban Land Tax Act, 1966, on the ground that its retrospective operation from 1963 constituted an unreasonable restriction on the right to acquire, hold and dispose of property and as such violative of article 19(1)(f) of the Constitution. In 1963 the Madras Legislature enacted the Madras Urban Land Tax Act, 1963, which came into force in the City of Madras on the first of July, 1963. The Madras High Court struck down the said Act on 25th March, 1966. Then the Madras Legislature enacted the Madras Urban Land Tax Act, 1966, making it retrospective from first July, 1963. The retrospective operation of the Act was challenged on the ground that it constituted an unreasonable restriction on the right to acquire, hold and dispose of property. In rejecting the contention, this is what the Supreme Court has stated:
“………It is contended on behalf of the petitioners that the retrospective operation of the law from 1st July, 1963, would make it unreasonable. We are unable to accept the argument of the petitioners as correct. It is not right to say as a general proposition that the imposition of tax with retro spective effect per se render the law unconstitutional. In applying the test of reasonableness to a taxing statute it is of course a relevant consideration that the tax is being enforced with retrospective effect but that is not conclusive in itself. Taking into account the legislative history of the present Act we are of opinion that there is no unreasonableness in respect of the retrospective operation of the new Act……”
13. In the light of the principles laid down by the Supreme Court we have to consider whether the retrospective operation given to the Amendment Act makes it unreasonable on the facts and circumstances of the case.
14. The Act came into force on 5th January, 1957, but the charging section, viz., section 6 came into effect on 1st July, 1957. The object of the Act was to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce. Assessments were made under the Act levying tax on sales effected in the course of inter-State trade or commerce after 1st July, 1957. Some dealers in Mysore State contended that if no sales tax would be leviable under the Mysore Act if the sales in the course of inter-State trade or commerce are deemed to have taken, place inside the State, then no tax is chargeable under the Act. In support of that contention, the dealers relied on the provisions of section 8 of the Act as it then stood before the Act was amended in 1958. In a sales tax revision petition this court upheld that contention. The decision of this court in Yadalam Lakshminarasimhiah Setty & Sons v. State Of Mysore was rendered on 23rd January, 1962. Against the said decision, the State of Mysore preferred an appeal to the Supreme Court which affirmed the decision of this court though on different grounds and dismissed the appeal on 10th November, 1964. The decision in State of Mysore v. Yaddalam Lakshminarasimhiah Setty & Sons was concerned with the provisions of the Act as it stood before it was amended in 1958. The Supreme Court relied on the wording of section 9(1) of the Act as it stood before the Act was amended in 1958. There was a conflict of opinion amongst the High Courts as to whether the decision of the Supreme Court in State of Mysore v. Yaddalam Lakshmi-narasimhiah Setty & Sons held good even with reference to the provisions of the Act as amended in 1958. In a series of decisions in 1968, the Supreme Court held that its decision in Yaddalam's case applied with equal force even after the amendment of the Act in 1958. On 9th June, 1969, the President of India promulgated the Central Sales Tax (Amendment) Ordinance, 1969, with the object of superseding the decision in Yaddalam's case and to bring to tax sales effected by every dealer in the course of inter-State trade or commerce notwithstanding the fact that no tax could have been levied under the sales tax law of the appropriate State if that sale had taken place inside that State. The Ordinance was replaced by the Amendment Act enacted by the Parliament.
15. The Amendment Act was not passed within a reasonable time of the decision of the Supreme Court in Yaddalam's case. After the decision of the Supreme Court in Yaddalam's case, the dealers could not have foreseen that sales effected in the course of inter-State trade or commerce would be chargeable to tax under the Act and they would not have collected tax from the buyers. In order to relieve the hardship that might be caused to the dealers by the retrospective operation of the Amendment Act, section 10 of the Amendment Act provided for exemption of sales effected in the course of inter-State trade or commerce between 10th November, 1964, and 9th June, 1969, provided the dealers have not collected any tax. In view of the exemption provided under section 10, no hardship would be caused to dealers who have effected sales after the date of the decision of the Supreme Court. Therefore, the retrospective operation of the Act during the period between 10th November, 1964, and 9th June, 1969, cannot be said to have imposed unreasonable restrictions on the fundamental rights guaranteed under article 19(1)(f) and (g) of the Constitution.
16. With regard to the period prior to 10th November, 1964, the dealers who have not collected any tax during the said period have not been exempted. It must be remembered that during the period prior to 10th November, 1964, the authorities under the Act were asserting that sales effected in the course of inter-State trade or commerce were liable to tax under the Act, and assessments were made and taxes were collected on the said basis. Several High Courts had upheld such levy. During the said period, the dealers could have foreseen that tax would be imposed on their sales and they could have collected tax or made other provision to meet the tax liability. The Parliament enacted the Amendment Act to cure the defective language of the provisions of the Act. In view of the principles laid down by the Supreme Court in the decisions cited above, it cannot be said that the retrospective operation given to the Act by the Amendment Act constitutes an unreasonable restriction on the freedom guaranteed by article 19(1)(f) and (g) of the Constitution of India. In that view, the first ground urged by the learned counsel for the petitioner is rejected.
17. Re. Ground No. II.— It was next contended that section 10 of the Amendment Act discriminates against dealers who have effected sales prior to 10th November, 1964, and have not collected any tax under the Act and that the classification of the dealers with reference to the date of the decision of the Supreme Court in Yaddalam's case is arbitrary having no relation to the object of the Act; that the said section is not severable from the rest of the provisions of the Amendment Act in regard to its retrospective operation as violative of article 14 of the Constitution. The argument of the learned counsel for the petitioner was that on 10th November, 1964, when the Supreme Court pronounced its judgment in Yaddalam's case, it did not make any law but merely interpreted the law, that under the provisions of the Act a dealer is not obliged to collect Central sales tax on inter-State sales and that there is no distinction between dealers who have not collected tax before 10th November, 1964, and thereafter. He submitted that the petitioner relying on the correct interpretation of the Act has not collected any tax under the Act and that by retrospective operation of the Act he is made to pay the tax when dealers similarly situated after 10th November, 1964, are exempted under section 10.
18. The object of the Amendment Act is to cure the defective language of the provisions of the Act with retrospective effect so that sales effected in the course of inter-State trade or commerce after 1st July, 1957, are charged to tax notwithstanding the decision in Yaddalam's case. By section 10 of the Amendment Act, however, exemption is given to dealers who have effected sales after 10th November, 1964, and have not collected tax under the Act. The question is whether section 10 of the Amendment Act violates article 14 of the Constitution?
19. The Legislature has a broad discretion in the matter of classification. In taxation statutes there is broader power of classification than in other kinds of legislation. (Vide Khandige Sham Bhat v. Agricultural Income-tax Officer). So long as the Legislature refrains from clear and hostile discrimination against particular persons or classes, courts have permitted an extremely wide discretion in the matter of classification for tax purposes.
20. The principles governing the reasonableness of classification in tax legislation have been stated in Cooley on Taxation, Volume I, at page 334 thus:
“1. A particular classification is proper where based on a reason and not purely arbitrary. There must be a reason for this classification as distinguished from mere accident, whim, caprice or vindictiveness. ‘Clear and hostile discriminations’ cannot be made under the guise of classifications. A discrimination is not arbitrary, of course, where based on sound reason of public policy. On the other hand, while there must be a reason for the classification, the reason need not be a good one, and it is immaterial that the statute is unjust. The test is not wisdom but good faith in the classification.
2. Radical differences are not required to sustain a classification for taxation. The differences upon which the classification is based need not be great nor conspicuous. Classification need not depend upon scientific or marked differences in the subjects classified but it is sufficient if it is practical.
3. The reasonableness of the classification cannot be determined by any fixed rule.
4. The legislature has a broad discretion in the matter of classification. In taxation, ‘there is a broader power of classification than in some Other exercises of legislation.’
5. Classification for taxation is not reviewable by the courts unless palpably arbitrary. It is no concern of the court whether the classification is the wisest or the best that could be made. The classification need not be ‘reasonable and proper’ according to the judgment of the reviewing judges, but the court must be able to see that legislators could regard it as reasonable and proper without doing violence to common sense. In other words, ‘there must be enough reason for it to support an argument, even if the reason is unsound.’ However, a discriminatory tax cannot be sustained if the classification is wholly illusory.
6. When a classification is attacked, and any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed.
7. A classification having some reasonable basis is not invalid merely because it is not made with mathematical nicety nor because in practice it results in some inequality.”
21. In Volume 51, American Jurisprudence, at pages 233-234, paragraph 174, it is stated:
“The power to make classifications with respect to taxation is with the legislature in the first instance, and its discretion in the matter is very broad and covers a wide range. In this connection it has been variously said that in taxation there is a broader power of classification than in some other exercises of legislation, that it is not necessary that the basis of a classification of property for tax purposes be deducible from the nature of things classified, and that the legislature, in classifying subjects for taxation, cannot be required to state the grounds of the classification.
Legislative classifications in tax matters are presumptively valid, the burden being on the challenger to prove that such a classification does not rest upon a reasonable basis and will hot be disturbed by the judiciary in the absence of unreasonable, discriminatory, or arbitrary action. To justify judicial interference, it has been said, the classification adopted “must be based on an invidious and unreasonable distinction or difference with respect to the subject of the tax. Where, however, it clearly appears that a classification adopted by the legislature in a tax statute is arbitrary and unlawful, it is the right and duty of the courts to pronounce the statute unconstitutional.”
22. In paragraph 177 at pages 237-238 it is stated:
“Substantial differences: Relationship to legislative object or governmental policy:— Classification in tax statutes, as in legislative enactments generally, must be based upon real and substantial differences between the persons, property or privileges taxed and those not taxed. Such differences do not, however, need to be great or conspicuous. As is frequently said, classifications for tax purposes, to be valid, must bear some reasonable relationship, to the object or purpose of the legislation, or to some permissible governmental policy or legitimate end of governmental action. They must rest upon some difference which bears a reasonable relationship to the act in respect of which the classification is proposed. It has been said, however, that the rule that legislative classifications must rest upon some ground of difference having a fair and substantial relation to the object of the legislation does not require that the classification made by a taxing statute or ordinance be related to the purpose for which the proceeds of the tax are to be spent.”
23. The Amendment Act has exempted the dealers who have not Collected tax under the Act after the decision of the Supreme Court. It makes no discrimination between dealer and dealer after 10th November, 1964. All dealers effecting sales after 10th November, 1964, and who have not collected tax under the Act are exempted under section 10. During the period between 10th November, 1964, and 9th June, 1969, all dealers are treated alike. Similarly, during the period anterior to 10th November, 1964, all dealers are treated alike.
24. The object of the Parliament in enacting section 10 of the Amendment Act is to provide relief against undue hardship caused by the retrospective operation of the law. The Parliament did not amend the Act within a reasonable period of the decision of the Supreme Court in Yaddalam's case and it took nearly five years for it to amend the Act. Between the date of the decision in Yaddalam's case and the date of the Ordinance, dealers could not have reasonably foreseen that they will be made liable to tax under the Act in respect of sales effected by them after 10th November, 1964, and before the date of the Ordinance. But before 10th November, 1964, when litigation was pending in the High Court and the Supreme Court the dealers could have foreseen that their sales would be charged to tax and therefore could have made appropriate provision to meet the tax liability. By the classification made under section 10, it cannot be said that any dealer has been selected for hostile treatment. In our judgment, the classification for purposes of exemption resting on the date of the decision in Yaddalam's case is a reasonable classification. Therefore, the second ground urged by the petitioner's learned counsel is untenable and it is rejected.
25. Re. Ground No. III.— The learned counsel for the petitioner next urged that section 25A of the Mysore Act is not a procedural provision but a substantive provision, that the Act by section 9(2) has not adopted the provisions of section 25A and if the said section has not been adopted under the Act, respondent No. 1 has no jurisdiction to rectify his earlier order. The learned Advocate-General submitted that the word “assess” in section 9(2) of the Act comprehends within its ambit rectification proceedings, and that in any event, the provisions of section 25A are provisions relating to “review” and as such by virtue of section 9(2) of the Act, the first respondent is entitled to act under the powers conferred by section 25A of the Mysore Act. Section 9(2) of the Act reads:
“(2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, collect and enforce payment of tax, including any penalty, payable by a dealer under this Act as if the tax or penalty payable by such a dealer under this Act is a tax or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, refunds, penalties, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly:
(Proviso omitted as unnecessary.)
26. Section 9(2) came up for consideration before the Supreme Court in State of Kerala v. P.P Joseph and Company and before this court in Mysore Electrical Industries Ltd. v. Commercial Tax Officer. In the said cases, it was held that section 9(2) has adopted the procedure prescribed by the general sales tax law of the appropriate State in the matter of assessment, reassessment, collection and enforcement of the payment of tax. The charge to tax is levied by the Act; but it has made no provisions for quantification and collection of the tax. It has adopted the machinery provisions of the general sales tax law of the appropriate State for quantification and collection of the tax levied under the Act. The question is whether the power conferred under section 25A of the Mysore Act is one relating to the machinery for quantification of tax. The word “assess” is used in Acts imposing tax in a comprehensive sense and includes all the proceedings starting from the filing of the returns or issue of a notice and ending with the determination of the tax payable by the assessee.
27. In Sankappa v. Income-tax Officer, the Supreme Court has held that the proceedings taken for rectification of assessment to tax either under section 35(1) or 35(5) of the Indian Income-tax Act, 1922, must be held to be proceedings for assessment. Section 25A provides for rectification of mistakes apparent from the record. Sub-section (1) of the said section reads:
“(1) With a view to rectifying any mistake apparent from the record, the assessing authority, appellate authority or revising authority, may, at any time, within five years from the date of an order passed by it, amend such order:
Provided that an amendment which has the effect of enhancing an assessment or otherwise increasing the liability of the assessee shall not be made unless the assessing authority, appellate authority or revising authority, as the case may be, has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard.”
28. The power conferred under the above provisions is one to amend an order made by the assessing authority, appellate authority or the revising authority with a view to rectify any mistake apparent from the record. Similar power is given to the courts under rule 1 of Order 47 of the Code of Civil Procedure which allows the review of a decree or order on the ground that the decree or order was made on account of some mistake or order apparent on the face of the record. Section 9(2) of the Act states that the authorities for the time being empowered under the general sales tax law of the appropriate State shall on behalf of the Government of India assess, reassess, collect and enforce payment of tax payable by a dealer under the Act as if the tax payable by such a dealer under the Act is a tax payable under the general sales tax law of the State. The said section further provides that for the purpose of assessment, reassessment and collection of tax, the authorities empowered may exercise all or any of the powers they have under the general sales tax law of the State which have been adopted by section 9(2). The said provisions are those relating to returns, provisional assessment, advance assessment of tax, appeals, reviews, revisions, references, refunds etc. In our opinion, the provisions of section 25A are provisions relating to review of assessment and therefore the said provision has been adopted by section 9(2). In that view, the third contention urged by the learned counsel for the petitioner also fails and is rejected.
29. Re. Ground No. IV.— The turnover in respect of which the petitioner was assessed related to the sale of cotton seeds. Under the Mysore Act, cotton seeds are taxed at the sale point by the first or earliest of successive dealers in the State liable to tax under the said Act. The contention of the petitioner's learned counsel was that where the goods are taxable at the point of sale under the Mysore Act the purchase is exempt from tax generally and therefore the sales effected in the course of inter-State trade or commerce are exempt from tax under sub-section (2A) of section 8 of the Act. The contention of the petitioner has been set out in paragraph 8 of the supplementary affidavit and it will be convenient for the purpose of understanding the petitioner's case if we set out the said paragraph. It reads:
“That apart, under section 8(2A) of the Central Sales Tax Act, 1956, if a transaction of sale or purchase of goods sold in the course of inter-State trade or commerce, is exempt from tax generally (sic) no Central sales tax at the point of purchase under the Mysore Sales Tax Act, 1957, the sale is exempt from tax generally. Whenever goods are taxable at the point of sale, the transaction of purchase is exempt from tax generally. Therefore no Central sales tax can be levied in respect of inter-State sales. There is a conflict between section 8(2A) and section 6(1 A) of the Central Sales Tax Act, 1956. Section 6 deals with charge. Section 8 deals with the rate of taxation. Both operate on the same field. Section 8(2A) is notwithstanding anything contained in section 6(1 A). Therefore section 8(2A) must prevail over section 6(1 A).”
30. sub-section (2A) of section 8 on which the petitioner's learned counsel relies reads:
“8. (2A) Notwithstanding anything contained in [sub-section (1A) of section 6 or] sub-section (1) or sub-section (2) of this section, if under the sales tax law of the appropriate State the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than (three per cent.) (whether called a tax or fee or by any other name), the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale of such goods shall be nil or, as the case may be, shall be calculated at the lower rate.
Explanation.— For the purposes of this sub-section a sale or purchase of goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law it is exempt only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods.”
([……………….] portion added by Central Act No. 28 of 1969.)
31. According to the petitioner's learned counsel the transaction of purchase is exempt from tax generally within the meaning of that expression found in sub-section (2A) of section 8 of the Act whenever the goods are taxable at the point of sale and similarly, the transaction of sale is exempt from tax generally whenever the goods are taxable at the point of purchase. The argument of the learned counsel proceeds on the assumption that “sale and purchase” are different transactions and not the facets of the same transaction. As observed by the Supreme Court in Devi Dass Gopal Krishnan v. State of Punjab, a sale and purchase are not different transactions but are different aspects of the same transaction. The purchase is only another side of the transaction of sale looked at from the standpoint of the purchaser. Under the Mysore Act and other similar Acts enacted by the State Legislatures in exercise of the powers conferred under entry No. 54 of List II of Schedule VII of the Constitution of India, the tax is levied on the transaction of sale of goods. The tax may be collected at the sale point or the purchase point as provided by the taxing statute. Where tax is collected at the sale point or at the purchase point, as the case may be, it is not correct to say that purchase or sale is exempt from tax generally. Sale or purchase of goods is said to be exempt from tax generally where the transaction of sale of goods is not taxed either at the sale point or at the purchase point at any stage or under any circumstances.
32. If the contention of the petitioner is accepted as correct, all sales effected in the course of inter-State trade or commerce, not only in Mysore State but throughout India, will be exempt from tax under the Act by virtue of sub-section (2A) of section 8. There will be no occasion for levying tax at lower rates as provided in the latter part of sub-section (2A) of section 8 since all sales will be exempt from tax under the Act. On the construction contended for by the learned counsel for the petitioner, section 6(1 A) would become wholly nugatory and if we accept his contention we must hold that although the Parliament enacted section 6(1 A) with the object of superseding the judgment of the Supreme Court in Yaddalam's case, it signally failed to achieve its object. A construction which leads to such a result must, if that is possible, be avoided: vide Commissioner of Income-tax v. Teja Singh. A statute is designed to be workable and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable. In our opinion, the object of sub-section (2A) of section 8 is to exempt transactions of sale of any goods if they are wholly exempt from tax under the sales tax law of the appropriate State and to make the said sales chargeable at lower rates, where under the sales tax law of the State, the sale transactions are chargeable to tax at lower rates. Where goods are taxable at the point of purchase under the sales tax law of the appropriate State the sale is not exempt from tax generally or where the goods are taxable at the point of sale the transaction of purchase is not exempt from tax generally. The plain meaning of the said sub-section is that if under the sales tax law of the appropriate State no tax is levied either at the point of sale or at the point of purchase at any stage, the tax under the Act shall be nil.
33. Sri K. Srinivasan, the learned counsel for the petitioner, in support of his argument relied on the decisions of this court in Mysore Silk House v. State of Mysore and in Peirce Leslie & Co. Ltd. v. State of Mysore S.T.R.P Nos. 63 and 64 of 1964.. In Mysore Silk House case, the assessee was a dealer in power-loom goods which were the subject-matter of inter-State sales. Under the Mysore Act power-loom goods were taxable at the point of first sale. The assessee's transactions in inter-State sales were the second sales and as such if the said sales were treated as inter-State sales they would not have been chargeable to tax under the Mysore Act. The assessment related to the period from 1st July, 1957, to 31st March, 1958. During the said period there was a proviso to sub-section (1) of section 8 which is in pari materia with sub-section (2A) of section 8. The said proviso read thus:
“Provided that, if under the sales tax law of the appropriate State, the sale or purchase of any goods by a dealer is exempt from tax generally and not in specified cases or in specified circumstances or is subject to tax (by whatever name called) at a rate or rates which is or are lower than the rate specified in sub-section (1), the tax payable under this Act on the turnover in relation to the sale of such goods in the course of inter-State trade or commerce shall be nil or shall be calculated at the lower rate, as the case may be.”
34. Dealing with the said proviso, this court held that the exemption provided under the proviso related to the sale of goods in the course of inter-State trade or commerce referred to in sub-section (1) of section 8 and that the said proviso laid down “that if the sale transaction dealt with in section 8(1) is exempt from taxation under the appropriate State law or if the purchase transaction leading to that sale transaction is exempt from taxation under that law, in either case, no tax can be levied under section 8(1).”. The decision in Mysore Silk House case was followed in Peirce Leslie's case. The assessee in Peirce Leslie's case was a dealer in cashew kernel and the assessment related to the years 1958–59 and 1959–60. Section 8 of the Act was amended by Central Act No. 31 of 1958 by which the proviso to sub-section (1) of section 8 was deleted and the said provision was inserted as sub-section (2A) of section 8. In Peirce Leslie's case, it was held that since under the Mysore Act tax was levied on cashew kernel at the point of purchase, the sale of cashew kernel in inter-State sales was not taxable under the Act. It was observed that sub-section (2A) of section 8 is in pari materia with the proviso to sub-section (1) of section 8 and therefore the decision in Mysore Silk House case governed the matter.
35. In our opinion, the decisions in the Mysore Silk House case and Peirce Leslie's case no longer hold good in view of the amendment of the Act made by Central Act No. 28 of 1969. The Supreme Court in Joseph's case has explained the effect of the said amendment thus:
“The effect of the Ordinance is to supersede the judgment of this court in Yaddalam Lakshminarasimhiah Setty's case. It is now made clear that even if no tax was leviable under the general sales tax law of the State in respect of intra-State transactions of sale, tax will be leviable on sale of goods effected by a dealer in the course of inter-State trade according to the sale tax law of the appropriate State……….
The provisions of the Act amended by the Ordinance have retrospective operation. The High Court held that because under the general sales tax law of the State eggs were not taxable except at the last point of purchase in the State, they were not taxable in the course of inter-State sale. But that view cannot now be sustained in view of the provisions of section 6 of the principal Act as amended by the Ordinance.”
36. Sri Srinivasan submitted that the decision in Joseph's case makes no reference to sub-section (2A) of section 8 and therefore that decision does not conclude the matter. Even though the said decision makes no reference to sub-section (2A) of section 8 this court is bound by the law as laid down by the Supreme Court. Therefore the fourth ground urged by the learned counsel for the petitioner cannot be sustained and has to be rejected.
37. Re. Ground No. V.— Lastly, it was urged that there is no mistake apparent from the record calling for rectification of the order exempting the turnover. It was argued that the mistake which cannot be made out except upon long and elaborate argument cannot ordinarily be regarded as a mistake apparent from the record.
38. In Joseph's case, the Supreme Court having held that the decision in Yaddalam's case has been superseded and that the sales in the course of inter-State trade or commerce are taxable although such sales may not be taxable if treated as intra-State sales under the appropriate sales tax law of the State, it requires no elaborate argument to hold that the order of the first respondent suffers from a mistake apparent from the record. The first respondent while allowing the appeal of the petitioner exempted the petitioner's turnover following the decision in Yaddalam's case. When the decision on which the order of the first respondent rested has been superseded, as held in Joseph's case, it is clear that the order of the first respondent made in the appeal suffers from a mistake apparent from the record. All the contentions urged by the learned counsel for the petitioner having failed, this writ petition fails and is dismissed, but in the circumstances, without an order as to costs.
39. Petition dismissed.