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PETITIONER: GOODYEAR INDIA LTD. ETC. ETC.

       Vs.

RESPONDENT: STATE OF HARYANA & ANR. ETC. ETC.

DATE OF JUDGMENT19/10/1989

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1990 AIR  781            1989 SCR  Supl. (1) 510  1990 SCC  (2)  71        JT 1989 (4)   229  1989 SCALE  (2)982

ACT:     Haryana General Sales Tax Act, 1973: Section 9 (Prior to its  amendment by Act No. 11 of 1979)--Purchase  Tax--Provi- sion for levy of purchase tax on ’Disposal’ of  manufactured goods--Notification--(No.  S.O 119/H.A. 20/73/Ss. 9 &  15/74 dated July 19, 1974)--Levy of tax on mere despatch of  goods to the dealers themselves outside the State--Validity of.     Section 9(1)(b) (As amended by Haryana General Sales Tax (Amendment and Validation Act, 1983--Purchase Tax--Taxing of purchase  of  raw material if goods  manufactured  therefrom despatched  outside the State otherwise than by way of  sale in  the course of inter State trade--Whether taxing of  con- signments in the course of inter State trade--Whether beyond the  legislative competence of State Legislature--Effect  of Constitution (Forty-Sixth) Amendment Act, 1982.     Section 9(1)(c)--Purchase tax on Exports--Food  Corpora- tion  of India--Purchase of foodgrains from  farmers  within the  State--Despatch of food grains to its Branches  outside the  State--Levy of Tax at the Point  Of  Despatch--Validity of. Section 24(3)--Validity of: Haryana  General Sales Tax (Amendment and  Validation)  Act, 1983--- Law declared ultra rites State Legislature--Validat- ing Act--No change made in substantive law mere direction to ignore judgment--Whether void.     Section   50--Penalty--Charging  provision  held   ultra vires-Penalty proceedings based on charging provision wheth- er invalid.     Bombay Sales Tax Act 1959: Section 13-AA (As inserted by Maharashtra Act XXVIII of 1982)--Scope, effect and  validity of. Purchase tax--Raw material purchased by paying tax  used in  the manufacture of goods--Manufactured goods  despatched to  Agents in other States--Levy of Additional  Tax--Whether tax  on  the consignment of manufactured goods  outside  the State--Whether beyond the legislat- 511 tive  competence of State Legislature--Whether violative  of Articles 14 and 301 of the Constitution of India.     Constitution  of India, 1950: Article 14--Section  13-AA of the Bombay Sales Tax Act, 1959 (As inserted by  Maharash- tra Act XXVIII of 1982)--Vires of.     Articles    245   and   246--Doctrine   of   Pith    and Substance--What  is--  Test  for  determination--Legislative

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competence--Relevancy of pith and substance rule.     Article 269(1)(h)--Constitution (Forty-Sixth)  Amendment Act, 1982--Object and effect of.     Article  301--Freedom of Trade Commerce and  Intercourse Bombay  Sales Tax Act,  1959  Section 13-AA (As inserted  by Maharashtra  Act  XXVIII of 1982)--Vires  of--Imposition  of Additional purchase tax--Permissibility of.     Schedule  VII--Entries  in the  Legislative  Lists--Only demarcate legislative field--Do not confer legislative  pow- ers.     Statutory  Interpretation:  Rules of  interpretation  of statutes-applicability     of    to    interpretation     of Constitution--Constitution--Not  to  be  interpreted  in   a narrow pedantic sense.     Fiscal  statutes--Tax liability--Whether can  be  deter- mined by reference to interpretation of a statute other than the statute creating liability--Should be construed  strict- ly--Assumptions and presumption in interpretation of  fiscal law--Whether permissible.     Determination of nature of a tax--Standard or measure on which    the   tax   is   levied--Whether    relevant    and conclusive--Courts  whether to look into Pith and  Substance Rule.     Taxable event--Charging event--What is--Test for  deter- mination--What is--Stages of taxation explained.     Excise duty--Sales Tax--Distinction between--Tax on sale of  goods--Tax on use or consumption  of  goods--Distinction between--Reasonable  construction  should  be  followed  and literal  construction  to  be avoided if  that  defeats  the manifest object and purpose of the Act. 512     Mischief Rule: Provisions of Constitutional  changes--To be construed in the context of Mischief Rule.     Practice  and Procedure: Precedent--What is--A  decision on  a  question which has not been  argued--Whether  can  be treated as precedent. Words and Phrases: ’Disposal’--Meaning of.

HEADNOTE:     The appellant/petitioner company--Good Year India Limit- ed--a registered dealer both under the Haryana General Sales Tax Act, 1973 and Central Sales Tax Act, 1956, was  manufac- turing automobile tyres and tubes at Ballabgarh in the State of  Haryana.  For  the said manufacturing  activity  it  was purchasing  various kinds of raw materials both  within  the State and from outside the State of Haryana. The Company was despatching these manufactured goods viz. tyres and tubes to its  own  branches  and sales depots outside  the  State  of Haryana.     The  assessing  authority  imposed  upon  the  appellant company  the  purchase tax under section 9  of  the  Haryana General  Sales Tax Act, 1973 in view of the despatches  made by  it of the manufactured goods to its various depots  out- side-the-State.     The petitioner company filed writ petition in the Punjab and  Haryana  High  Court challenging the  validity  of  the Notification  levying the tax. A Division Bench of the  High Court  allowed the petition holding that disposal  of  goods being  separate and ’distinct from despatch thereof, a  mere despatch  of goods out Of the State by a dealer to  his  own branch while retaining both ’the title-and possession there- of does not come within the ambit of the phrase "disposes of the  manufactured goods in any manner otherwise than by  way

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of  sale",  as employed in Section 9(i)(a)(ii) of  the  Act. Accordingly  the High Court set aside the assessment  orders and  quashed  the impugned Notification as  ultra  vires  of section 9 on the ground that whereas Section 9 provided only for the levy of purchase tax On the disposal of the manufac- tured  goods, the impugned Notification makes mere  despatch of  goods to the dealer themselves taxable. To override  the effect of the said judgment the Haryana Legislature  enacted Haryana  General  Sales Tax (Amendment and  Validation)  Act 1983  where by Section 9 of the Act was amended with  retro- spective effect to include within its sweep the despatch  of manufactured  goods  to  a place outside the  State  in  any manner otherwise than by way of sale. The impugned Notifica- tion and the con- 513 sequential action taken thereunder were also validated.     The petitioner company filed writ petitions  challenging the assessments. The High Court allowed the petitions  hold- ing  section  9(1)(b) of the Haryana General Sales  Tax  Act 1973 as amended by the Haryana General Sales Tax  (Amendment and Validation) Act, 1983 in so far as it levied a  purchase tax  on  the consignment of goods outside the State  in  the course  of  inter-State  trade or commerce  was  beyond  the legislative competence of the State of Haryana and was  void and  inoperative because it intruded and trespassed into  an arena  exclusively meant for taxation by the Union of  India under Entry 92-B of List I of the Seventh Schedule.  Accord- ingly  the  High Court set aside the amended  provisions  of section 9 as also the retrospective validation of the  Noti- fication  and  the consequential validation of  all  actions taken  thereunder. Against this decision of the High  Court, State  of Haryana preferred Special Leave Petitions in  this Court.     During  the pendency of these Special  Leave  Petitions, the assessing authority issued Show-cause notices asking the petitioner  company  to show-cause why in  addition  to  the purchase  tax, it should not be liable to penalty  as  well. The  Petitioner  company again filed writ petitions  in  the Punjab  &  Haryana High Court challenging  the  validity  of these  notices.  In the meantime a Full Bench  of  the  High Court decided the question again and overruling the decision of the earlier Division Bench held that the taxing event was the  act  of  purchase and not the act of  despatch  of  the consignment.  The  Full Bench of the High  Court  held  that section  9(1)(b)  as amended was neither invalid  nor  ultra vires. Against the aforesaid judgment of the Full Bench  the Petitioner  Company filed appeals in this Court.  All  these questions are the subject matters of these appeals.     In the connected appeals, the Food Corporation of  India was  procuring food-grains from the farmers through  commis- sion  agents in tile mandis of Haryana and despatching  them to its own branches in the deficit State of the country. The Corporation branches in the recipient States were  supplying these stocks to the State agencies/Fair Price Shops and were also  paying tax as per the provisions of the Sales Tax  law of the respective States. Some of the stocks were distribut- ed  within the State of Haryana for the public  distribution system  for which sales tax was charged. and deposited  with the  sales-tax depots as per the Haryana General  Sales  Tax Act,  1973. In respect of the inter-State despatch of  wheat and  other food-grains by the Food Corporation of  India  to its own branches tax was attracted at the time of despatch 514 under section 9(1)(c) of the Haryana Act. The Food  Corpora- tion of India impugned the levy of tax.

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   In   the   other   connected   appeals   the   appellant companies--Hindustan  Lever  Ltd. and  Wipro  Products--were manufacturing  vanaspati, soaps, chemicals and  agro  chemi- cals.  For  the  said manufacturing  activities,  they  were purchasing  non-essential vegetable oil (VNE oil) and  other raw materials and were paying purchase tax @4% under section 3 of the Bombay Sales Tax Act, 1959. The VNE oil was  subse- quently  used by the appellant companies in the  manufacture of  vanaspati and soaps. The finished products  manufactured by the appellant companies viz. vanaspati and soaps used  to be  despatched  outside the State of  Maharashtra  to  their clearing  and  forwarding agents.  The  assessing  authority levied  additional purchase tax @ 2% under section 13-AA  of the Act on the purchase of said goods---VNE oil.      The  appellant  companies filed writ petitions  in  the High Court challenging the orders of the assessing authority levying  the  additional  tax of 2% and also  the  vires  of section 13-AA of the Bombay Sales Tax Act, 1959 under  which the additional tax was levied, contending that the addition- al  tax  of 2% levied on raw materials, where  the  finished goods  manufactured  therefrom were despatched  outside  the State  was  in the nature of consignment tax which  was  not within the legislative competence of the State Legislature.     The  High Court dismissed the petitions holding (i)  the additional  purchase tax levied under section 13-AA  of  the Act  was on the purchase value of VNE oil used in the  manu- facturing of goods transferred outside the State and not  on the value of the manufactured goods so transferred; (ii) the State Legislature was competent to levy the tax under  Entry 54 of the State List in the Seventh Schedule to the  Consti- tution, and (iii) Section 13-AA was not violative of  either Article 14 or Article 301 of the Constitution of India.     Against the decision of the High Court appellant  compa- nies filed appeal in this Court. Disposing of the matters, this Court, HELD: (Per Mukharji, J.) 1. Analysing section 9 of the Haryana General Sales Tax Act, 515 1973  it is clear 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 liability to pay  tax under  section  9(1)(b) does not accrue  on  purchasing  the goods  simpliciter,  but only when these are  despatched  or consigned  out of the State of Haryana. The  section  itself does  not provide for imposition of the purchase tax on  the transaction  of purchase of the taxable goods but when  fur- ther  the  said taxable goods are used up  and  turned  into independent taxable goods, losing its original identity, and thereafter  when the manufactured goods are despatched  out- side  the State’ of Haryana and only then tax is levied  and liability to pay tax is created. It is the cumulative effect of  that event which occasions or causes the tax to  be  im- posed. [539F-H; 540A-B]    1.1  A taxable event is that which is closely related  to imposition.  In  the instant section  viz.  section  9(1)(b) there  is  such close relationship only with  despatch.  The goods  purchased are used in manufacture of new  independent commodity  and  thereafter the said manufactured  goods  are

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despatched  outside the State of Haryana. In this series  of transactions the original transaction is completely eclipsed or  cease  to exist when the levy is imposed  at  the  third stage  of  despatch of manufacture. The levy has  no  direct connection  with the transaction of purchase of  raw-materi- als,  it has only a remote connection of lineage.  The  mere consignment  of goods by a manufacturer to his own  branches outside  the State does not in any way amount to a  sale  or disposal  of the goods as such. The consignment or  despatch of  goods is neither a sale nor a purchase. The tax  imposed under  Section  9(1)(b)  is a tax on despatch.  The  tax  on despatch  of goods outside the territory of the  State  cer- tainly is in the course of inter-State trade or commerce and amounts  to  imposition of consignment tax,  and  hence  the latter  part  of section 9(1)(b) is ultra  vires  and  void. [540G-H; 542H; 543A; 544E; 545A] Tata  Iron & Steel Co. v. State of Bihar, [1958]  SCR  1355, referred to.     Good Year India Ltd. v. State of Haryana, 53 STC 163 and Bata  India  Ltd. v. State of Haryana & Anr.,  54  STC  226, approved. 516     Des  Raj Pushap Kumar Gulati v. The State of Punjab,  58 STC 393, overruled.     Yusuf  Shabeer & Ors. v. State of Kerala & Ors., 32  STC 359;  Coffee  Board v. Commissioner of  Commercial  Taxes  & Ors., 60 STC 142 and Coffee Board, Karnataka v. Commissioner of Commercial Taxes, Karnataka, 70 STC 162, distinguished.     State  of  Tamil Nadu v. M.K. Kandaswami,  36  STC  191; Ganesh  Prasad  Dixit v. Commissioner of  Sales  Tax,  M.P., [1969]  24 STC 343 and Malabar Fruit & Company v. Sales  Tax Officer, Pallai, 30 STC 537, distinguished.     1.2  The effect of the Constitution (Forty-sixth  Amend- ment)  Act, 1982 is that the field of taxation on  the  con- signment/despatch  of  goods in the  course  of  inter-State trade or commerce expressly comes within the purview of  the legislative competence of the Parliament. [543H]     2.  If section 9(1)(b) is ultra vires, the penalty  pro- ceedings  would automatically go as they are  in  substance, based on the violation of section 9(1)(b) of the Act and the consequent proceedings flowing therefrom. [545B]     3.  Section 24(3) of the Haryana General Sales Tax  Act, 1973 without making any change in the substantive  provision purports  to  give a direction to ignore  the  judgments  in Goodyear and Bata India Ltd. cases. This provision is  void. [546B]     Shri Prithvi Cotton Mills Ltd. v. Broach Borough Munici- pality,  [1969] 2 SCC 283 and Dy. Commissioner of Sales  Tax (Law)  Board of Revenue (Taxes) v. M/s Thomas Stephen &  Co. Ltd. Quilon, [1988] 2 SCC 264, followed.     4. In respect of inter-State despatch of wheat and other food grains by Food Corporation of India to its own  branch- es,  tax is attracted at the time of despatch under  Section 9(1)(c)  of the Haryana Act. Section 9 is the charging  sec- tion for taxation in case where the goods are purchased  for export. There is no other provision for levy of purchase  or sales tax in such cases of export. [547B]     4.1 No tax is payable under the Haryana Act when exports outside the State take place either in the course of  inter- State sale or export out of the territory of India. But  the tax is payable for sale in the course 517 of  inter-State  trade and commerce i.e. under  the  Central Sales   Tax   Act.   It  is  only   when   the   goods   are despatched/consigned  to  the  depots of the  FCI  in  other

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States  that  tax is levied under section 9 of  the  Haryana Act. This is in addition to the sales tax paid by the FCI on the  sale  of  grains in the recipient States.  In  view  of sections  14 & 15 of the Central Sales Tax Act,  it  becomes clear  that  wheat is one of the  commodities  specified  as ’declared  goods’ and in respect of which the  intention  is clear  that  the tax is payable only once  on  the  declared goods.  In the case of inter-State sale if any tax has  been paid earlier on declared goods inside the State the same  is to  be  refunded  to the dealer who is paying  tax  on  such inter-State Sales. On these transactions no tax is liable in the recipient State, while in case of inter-State  despatch- es, the tax is leviable twice. Section 9(1)(c), which  inso- far  as it purports to tax, exports, is beyond the  legisla- tive competence of the State of Haryana. [547E-G]     5.  The incidence of the levy of additional tax  of  two paise  in the rupee under Section 13-AA of the Bombay  Sales Tax  Act, 1959 is not on the purchase of goods, but  such  a levy  is  attracted only when--(a) the goods which  so  pur- chased  on payment of purchase tax are used in the  manufac- ture of taxable goods; and (b) the goods so manufactured are despatched  to his own place of business or to  his  agent’s place  of business outside the State. Therefore,  the  inci- dence  of  tax is attracted not merely on the  purchase  but only when the goods so purchased are used in the manufacture of  taxable goods and are despatched outside the State.  The incidence  of additional tax has no nexus with the  purchase of the raw-materials. [553A-B; D]     5.1 Purchase tax under section 3 of the Act is attracted when the taxable event i.e. the purchase of goods occurs but the  taxable event for the imposition of additional  tax  of two  paise in the rupee occurs only when the goods  so  pur- chased are used in the manufacture of taxable goods and such taxable  goods are despatched outside the State by a  dealer manufacturer.  The goods which are despatched are  different products  from the goods on the purchase of  which  purchase tax  was  paid. 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. [553E; 556F; 557C]     5.2  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. Therefore the charge under 518 section 13-AA is a duty on despatch. Accordingly this charge can not be sustained.[557D]     The Bill to amend s. 20 of the Sea Customs Act, 1878 and S. 3 of the Central Excises & Salt Act, [1944], (1964) 3 SCR 787;  M/s Guruswamy & Co. v. State of Mysore, [1967]  1  SCR 548; Mukunda Murari Chakravarti & Ors. v. Pabitramoy Ghosh & Ors.,  AIR  1945  FC 1; Kedar Nath Jute  Mfg.  Co.  Ltd.  v. C.I.T., 82 ITR SC 363; State of M.P. v. Shyam Charan Shukla, 29 STC SC 215; R.C. Jail v. Union of India, [1962] Suppl.  3 SCR  436; Union of India v. Bombay Tyre International  Ltd., [1984]  1 SCR 347 and State of Karnataka v. Shri  Ranganatha Reddy, [1978] 1 SCR 641, referred to.     Wipro Products v. State of Maharashtra, [1989] 72 STC 69 Bom., Reversed.     5.3 Imposition of a duty or tax in every case would  not tantamount per se to any infringement of Article 301 of  the Constitution.  Only such restrictions or  impediments  which directly or immediately impede free flow of trade,  commerce

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and  intercourse  fail  within the  prohibition  imposed  by Article 301. A tax in certain cases may directly and immedi- ately restrict or hamper the flow of trade. but every  impo- sition  of tax does not do so. Every case must be judged  on its own facts and its own setting of time and circumstances. Unless the court first comes to the finding on the available material  whether  or not there is an  infringement  of  the guarantee  under  Article  301 the further  question  as  to whether  the Statute is saved under Article 304(b) does  not arise. [558B-C]     5.4  In the instant case. the goods taxed do  not  leave the  State in the shape of raw material, which change  their form  in  the State itself and there is no question  of  any direct, immediate or substantial hindrance to a free flow of trade.  Therefore Section 13-AA of the Bombay Sales Tax  Act 1959 is not violative of Article 301. [558D-E]     Atiabari  Tea  Co. Ltd. v. The State of  Assam  &  Ors., [1961] 1 SCR 809; The Automobile Transport (Rajasthan)  Ltd. v.  The State of Rajasthan, [1963] 1 SCR 491; Andhra  Sugars Ltd. v. State of Andhra Pradesh, [1968] 1 SCR 705; State  of Madras v. N.K. Nataraja Mudaliar, [1968] 3 SCR 829 and State of  Kerala  v. A.B. Abdul Khadir & Ors., [1970] 1  SCR  700, referred to.     Kalyani  Stores v. The State of Orissa & Ors., [1966]  1 S.C.R. 865, relied on. 519     6.  The provisions of constitutional changes have to  be construed  not in a narrow isolationism but on a much  wider spectrum  and the principles laid down in Heydon’s case  are instructive. [529H; 530A]     Black   Clawson   International  Ltd.   v.   Papierwerke Waldhof-Aschaffenburg, [1975] 1 All E.R. 810, referred. Heydon’s case, (1584) 3 Co. Rep. 7a, relied on.     7. In construing the expressions of the Constitution  to judge  whether  the provisions of a statute are  within  the competence  of the State Legislature, one must bear in  mind that the Constitution is to be construed not in a narrow  or pedantic  sense. The Constitution is not to be construed  as mere law but as the machinery by which laws are to be  made. [533F]     James v. Commonwealth of Australia, [1936] A.C. 578; The Attorney  General  for the State of New South Wales  v.  The Brewery  Employees  Union  etc., [1908] 6  C.L.R.  469;  Re. Central  Provinces & Berar Sales of Motor Spirit and  Lubri- cants Taxation Act 1938, A.I.R. 1939 F.C.I. and The Province of Madras v. M/s Boddu Paidanna & Sons, A.I.R. 1942 F.C. 33, referred to.     8. The nomenclature of the Act is not conclusive and for determining  the true character and nature of  a  particular tax,  with  reference  to the legislative  competence  of  a particular  Legislature, the Court will look into  its  pith and substance. [543H; 544A]     Governor  General  in  Council v.  Province  of  Madras, [1945]  72  I.A. 91 and Ralla Ram v. The  Province  of  East Punjab, A.I.R. 1949 F.C. 81, referred to.     9.  The doctrine of pith and substance means that if  an enactment  substantially  falls within the  power  expressly conferred  by  the Constitution upon the  Legislature  which enacted  it, it cannot be held to be invalid merely  because it incidentally encroaches upon matters assigned to  another legislature. [555H; 556A]     Kerala State Electricity Board v. Indian Aluminium  Co., [1976]  1 S.C.R. 552 and Prafulla Kumar Mukherjee & Ors.  v. Bank of Commerce, A.I.R. 1947 PC 60, referred to. 9.1 The true test to find out what is pith and substance  of

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the 520 legislation is to ascertain the true intent of the Act which will determine the validity of the Act. [577B]     10.  There  are three stages in the imposition  of  tax. There  is the declaration of liability, that is the part  of the Statute which determines what persons in respect of what property are liable. Next, there is the assessment- Liabili- ty  does  not  depend on assessment,  that  exhypothesi  has already been fixed. But assessment particularises the  exact sum which a person is liable to pay. Lastly comes the method of  recovery if the person taxed does not  voluntarily  pay. [539B-C]     Whitney  v. Commissioner of Inland Revenue, [1926]  A.C. 37  and  Chatturam & Ors. v. C.I.T., Bihar, 15  I.T.R.  F.C. 302, referred to.     11. While determining nature of a tax, though the stand- ard  or  the  measure on which the tax is levied  may  be  a relevant consideration, it is not the conclusive  considera- tion. [556C]     Governor  General  in  Council v.  Province  of  Madras, [1945]  72  I.A. 91; R.R. Engineering Co. v.  Zila  Parishad Bareilly & Anr., [1980] 3 S.C.R. 1; In Re A reference  under the  Government  of Ireland Act, 1920, [1936] A.C.  352  and Navnitlal  C. Javeri v. K.K. Sen, Appellate  Asstt.  Commis- sioner of Income Tax ’D’ Range Bombay, [1965] 1 S.C.R.  909, referred to.      12.  The  liability  to tax would  be  determined  with reference to the interpretation of the Statute which creates it. It cannot be determined by referring to another Statute. [555G]      13. In fiscal legislations normally a charge is  creat- ed. The. mischief of taxation occurs on the happening of the taxable  event.  Different  taxes  have  different   taxable events. A taxing event is that event the occurrence of which immediately attracts the levy or the charge of tax. What  is the taxable event or what necessitates taxation in an appro- priate  Statute must be found by construing the  provisions. The  main test for determining the taxable event is that  on the  happening of which the charge is affixed. [552H;  553A: 552G: 533E; 539B]      14.  Fiscal laws must be strictly construed. n  is  not permissible to make assumptions and presumptions in a fiscal provision. [536H; 538G]      C.S.T.,  U.P.  v. The Modi Sugar Mills Ltd.,  [1961]  2 S.C.R.  189 and Baidyanath Ayurved Bhawan (P) Ltd.,  Jhansi, v. Excise Commis- 521 sioner, U.P. & Ors., [1971] 2 S.C.R. 590, referred to.     15. While interpreting a Statute a reasonable  construc- tion  should  be followed and literal  construction  may  be avoided  if that defeats the manifest object and purpose  of the Act. [555F]     Commissioner of Wealth-tax, Bihar & Orissa v. Kripashan- kar Dayashankar Worah, 81 I.T.R. 763 and Income Tax  Commis- sioners for City of London v. Gibbs, 10 I.T.R. (Suppl.)  121 H.L., referred to.     16.  The Entries in the Constitution only demarcate  and legislative fields of the respective legislatures and do not confer legislative powers as such. [544H; 545A]     17. A precedent is an authority only for what it actual- ly  decides and not for what may remotely or even  logically follows from it. [537E]     Quinn  v.  Leathem,  [1901] A.C. 495 and  The  State  of Orissa v. Sudhansu Sekhar Misra & Ors., [1968] 2 S.C.R. 154,

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followed.     17.1 A decision on a question which has not been  argued cannot be treated as a precedent. [542B]     Rajput  Ruda Maha & Ors. v. State of Gujarat,  [1980]  2 S.C.R. 353, followed. (Per Ranganathan, J.) (Concurring)     1. Section 9 of the Haryana General Sales Tax Act,  1973 as  well as section 13-AA of the Bombay Sales Tax Act,  1959 purport  only  to  levy a purchase tax.  The  tax,  however, becomes  exigible not on the occasion or event  of  purchase but  only later. It materialises only if the  purchaser  (a) utilises  the goods purchased in the manufacture of  taxable goods, and (b) despatches the goods so manufactured  (other- wise  then by way of sale) to a place of  business  situated outside  the State. The legislation, however, is careful  to impose the tax only on the price at which the raw  materials are purchased and not on the value of the manufactured goods consigned outside the State. [559G-H; 560A]      2.  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 and a case  like the present where the tax, though described as purchase tax, actually becomes effective with reference to 522 a  totally different class of goods and, that too,  only  on the  happening of an event which is unrelated to the act  of purchase. [560D-E]     2.1 The "taxable event", if one might use the expression often used in this context, is the consignment of the  manu- factured goods and not the purchase. [560E]     2.2  The background of the  Constitutional  (Forty-sixth Amendment)  indicates that there were efforts at  sales  tax avoidance  by sending goods manufactured in a State  out  of raw  materials  purchased inside to other States by  way  of consignments  rather  than by way of sales  attracting  tax. This  situation  lends  force to the view  that  the  State, unable to tax the exodus directly, attempted to do so  indi- rectly by linking the levy ostensibly to the "purchases"  in the State. [560G-H] Andhra  Sugar  Ltd. & Anr. v. State, [1968] 1 SCR  705,  re- ferred to.     State of Tamil Nadu v. Kandaswami, [1975] 36 S.T.C. 191, distinguished.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1166-72 of 1985 etc. etc.     From the Judgment and Order dated 24.1.85 of the  Punjab &  Haryana High Court in C.W.P. Nos. 698 to 703 and  733  of 1984.     Raja Ram Aggarwal, B. Sen, Dr. Devi Paul, D.S.  Tawatia, Soli J. Sorabjee, Kapil Sibal and S.K. Dholakia, A.N.  Haka- sar, D.N. Misra, Mukul Mudgal, Ravinder Narain, P.K. Ram, S. Sukumaran, S. Ganesh, Mahabir Singh, H.S. Anand. R. Karania- wala, Mrs. Manik Karanjawala, A.S. Bhasme and A.M.  Khanwil- kar for the Appearing Parties. The following Judgments of the Court were delivered:     SABYASACHI MUKHARJI, J. Except civil appeals Nos. 416263 of  1988,  in  these appeals along with  the  special  leave petitions  and  the  writ petition, we  are  concerned  with Sections  9(1) and 24(3) as well as the penalty  proceedings initiated under Section 50 of the Haryana General Sales  Tax Act, 1974 (hereinafter referred to as ’the Act’). So far  as

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civil  appeals  Nos. 4 162-63 of 1988 are  concerned,  these involve  the scope, effect and validity of Section  13AA  of the Bombay Sales 523 Tax Act. 1959 (hereinafter referred to as ’the Bombay  Act’) as introduced by the Maharashtra Act No. XXVIII of 1982.  It will,  therefore, be desirable first to deal with the  ques- tion of the Act, and then with the provisions of the  Bombay Act as mentioned hereinbefore.     The   appellant/petitioner--Goodyear  India  Ltd.,   was engaged  at all relevant times, inter alia, in the  manufac- ture and sale of automobile tyres and tubes. It manufactured the  said tyres and tubes at its factory at  Ballabhgarh  in the  district of Faridabad in the State of Haryana. For  the said manufacturing activity the appellant had, from time  to time, to purchase various kinds of raw-materials both within the  State and outside the State. It is stated that about  7 to  10% of the total needs of raw-materials on an all  India basis  were locally procured by the appellant  from  Haryana itself.  The  raw-materials purchased in Haryana  were:  (i) pigments  (partly),  (ii) chemicals  (partly),  (iii)  wires (partly),  (iv) carbon black (partly), (v) rubber  (partly), and (vi) fabric (partly). The rest of the requirements  were imported from other States. The appellant had its depots  at different places in the State of Haryana as well as in other States. After manufacturing the said tyres and tubes,  about 10 to 12% of the total manufactured products used to be sold in  the State of Haryana either locally or in the course  of inter-State  trade  & commerce or in the  course  of  export outside  the country and also sold locally against  Declara- tion Form No. ST-15. It was stated that at the relevant time the local sales including sales in the course of inter-State trade & commerce and in the course of export from the  State of  Haryana was about 30 to 35%. The appellant was a  regis- tered  dealer  both under the Haryana Act  and  the  Central Sales Tax Act, and had been submitting its quarterly returns and  paying the sales-tax in accordance with law,  according to the appellant. In 1979, the assessing authority,  Farida- bad, imposed upon the appellant the purchase tax under  Sec- tion 9 of the Act for the assessment year 1973-74 and subse- quently  for  the years 1974-75 and 1975-76 as well  on  the despatches  made by the appellant on the manufactured  goods to  its various depots outside the State. Subsequently,  the relevant  revenue authorities sought to impose purchase  tax under  Section 9(1) of the Act and imposed purchase  tax  on despatches  of manufactured goods, namely, tyres and  tubes, to  its  various  depots in other States. This  led  to  the filing  of  various writ petitions in the Punjab  &  Haryana High Court by the appellant/petitioner.     In  respect of the assessment years 1976-77 to  1979-80. these  questions were considered by the Punjab  and  Haryana High  Court, and the writ. petitions were decided in  favour of the appellant on December 524 4,  1982. The said decision being the decision  in  Goodyear India Ltd. v. The State of Haryana & Anr. is reported in  53 STC  163. The Division Bench of the High Court in  the  said decision  held that both on principle and precedent, a  mere despatch  of goods out of the State by a dealer to  his  own branch  while retaining both title and  possession  thereof, does  not come within the ambit of the phrase  "disposes  of the  manufactured goods in any manner otherwise than by  way of sale", as employed in section 9(1)(a)(ii) of the Act. The High  Court further held that the decision of this Court  in The  State of Tamil Nadu v. M.K. Kandaswami, [1975]  36  STC

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191 was no warrant for the proposition that a mere  despatch of goods was within the ambit of disposing them of. The High Court  also  distinguished  the decision of  this  Court  in Ganesh  Prasad  Dixit v. Commissioner of  Sales  Tax,  M.P., [1969]  24  STC  343, and held that  Notification  No.  S.O. 119/H.A.  20/73/Ss.  9 & 15/74 dated July  19,  1974  issued under  Section  9 (prior to its amendment by Act No.  11  of 1979)  was ultra vires of Section 9 of the Act. It was  held that  whereas  the  section provided only for  the  levy  of purchase  tax  on the disposal of  manufactured  goods,  the impugned notification by making a mere despatch of goods  to the  dealers themselves taxable, in essence, legislates  and imposes  a substantive tax which it obviously could not.  It was held that this was contrary to and in conflict with  the provisions  of  section 9. The High Court  referred  to  the relevant  portion  of unamended Section 9 of  the  Act  with which  it was confronted and the notification. In  order  to appreciate  the said decision and the position, it  will  be appropriate  to  set out the said  provisions,  namely,  the unamended  provisions of Section 9 as well as the  notifica- tion:               "9.  Where  a dealer liable to pay  tax  under               this  Act  purchases goods  other  than  those               specified in Schedule B from any source in the               State and--               (a) uses them in the State in the  manufacture               of,--               (i) goods specified in Schedule B or               (ii)  any  other  goods and  disposes  of  the               manufactured  goods  in any  manner  otherwise               than  by way of sale whether within the  state               or  in  the course of  inter--State  trade  or               commerce or within the meaning of  sub-section               (1) of Section 5 of the Central Sales Tax Act,               1956,  in  the  course of export  out  of  the               territory of India,               525               (b) exports them,               in  the circumstances in which no tax is  pay-               able  under any other provision of  this  Act,               there  shall be levied, subject to the  provi-               sions of section 17, a tax on the purchase  of               such  goods  at such rate as may  be  notified               under section 15."               The relevant notification was as follows:               "Notification  No. S.O. 119/H. A. 20/73/Ss.  9               and 15/74 dated the 19th July, 1974.               In exercise of the powers conferred by section               9  and  subsection (1) of section  15  of  the               Haryana  General  Sales  Tax  Act,  1973,  the               Governor  of Haryana hereby directs  that  the               rate of tax payable by all dealers in  respect               of  the  purchases of goods other  than  goods               specified in Schedules C and D or goods liable               to  tax  at the first stage notified  as  such               under  section 18 of the said Act, if used  by               them  for purposes other than those for  which               such goods were sold to them shall be the rate               of tax leviable on the sale of such goods:                         Provided that where any such dealer,               instead  of using such goods for  the  purpose               for  which they were sold to  him,  despatches               such goods or goods manufactured therefrom  at               any  time for consumption or sale outside  the               State  of Haryana to his branch or  commission

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             agent or any other person on his behalf in any               other State and such branch, commission  agent               or other person is a registered dealer in that               State  and  produces a  certificate  from  the               assessing authority of that State or  produces               his  own  affidavit and the affidavit  of  the               consignee  of  such goods duly attested  by  a               Magistrate  or  Oath  Commissioner  or  Notary               Public in the form appended to this  notifica-               tion to the effect that the goods in  question               have  been  so  despatched  and  received  and               entered in the account books of the consignee,               the  rate of tax on such goods shall be  three               paise in a rupee on the purchase value of  the               goods so despatched."     The High Court, as stated before, referred to section  9 and held that the expression ’disposes of’ was not basically a term of legal art and, therefore, it was proper and neces- sary to first turn to its ordinary 526 meaning  in  order to determine whether a mere  despatch  of goods  by  a dealer to himself would connote  ’disposal  of’ such goods by him. The High Court referred to the dictionary meaning of ’disposes of’ in Webster’s Third New Internation- al  Dictionary. Reference was also made to 27  Corpus  Juris Secundum,  P. 345, and ultimately it came to the  conclusion that the phrase ’disposes of’ or ’disposal’ cannot be possi- bly  equated with the mere despatch of goods by a dealer  to himself.  After  referring to the relevant  provisions  with which this Court was concerned in Kandaswami’s case (supra), the  High Court held that that case was no warrant for  con- struing the expression ’despatch’ as synonymous to  ’dispos- al’. On the other hand, the court held that the decision  of this  Court  emphasises that the  expression  ’disposal’  of goods  is separate and distinct from despatch  thereof.  Ac- cording to the High Court, the same position was  applicable to Ganesh Prasad Dixit’s case (supra), and in those  circum- stances  held that the term ’disposes of’ cannot be  synony- mous with ’disposal’, and once that is held then the notifi- cation mentioned above travelled far beyond what is provided in  Section 9 of the Act, while the said provision  provided only  for levy of purchase tax on disposal  of  manufactured goods.               The High Court observed as follows:                         "Once  it  is  held  as  above,  the               impugned   Notification  No.   S.O.   119/H.A.               20/73/Ss.  9 and 15/74 dated 19th  July,  1974               (annexure P-2), plainly travels far beyond the               parent section 9 of the Act. Whereas the  said               provision  provided  only for the  levy  of  a               purchase  tax on the disposal of  manufactured               goods,  the  notification  by  making  a  mere               despatch  of goods to the  dealers  themselves               taxable  in essence, legislates and imposes  a               substantive  tax  which it  obviously  cannot.               Indeed,  its terms run contrary to and are  in               direct conflict with the provisions of section               9 itself. There is thus no option but to  hold               that  the notification, which is  a  composite               one,  is ultra vires of section 9 of  the  Act               and is hereby struck down."     The  High  Court also noted that though  the  challenged assessment orders were appealable, however, as the challenge was  to  the  very validity of the  notification  which  was obviously  beyond the scope of the appellate authority,  the

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writ  petitions  were entertainable as  the  assessment  was based on the notification which was frontally challenged. As a  result, the High Court quashed the notification  and  set aside  the  assessment orders. The said  decision  is  under challenge in appeal to this Court. 527     It may be mentioned that sub-section (1) of section 9 of the  Act had been introduced by the Haryana Act, 55 of  1976 in the Act. After the aforesaid decision of the High  Court, the  Haryana Legislature intervened and enacted the  Haryana General  Sales  Tax (Amendment & Validation)  Act,  1983  by which Section 9 of the principal Act was amended as follows:               "Amendment  of Section 9 of Haryana Act 20  of               1973--in Section 9 of the principal Act,--               (a) in sub-section (1) ,--               (i) for clause (b), the following clause shall               be  substituted  and shall be deemed  to  have               been  substituted  for the  period  commencing               from  the  27th day of May, 1971,  and  ending               with the 8th day of April, 1979, namely:               "(b) purchases goods, other than those  speci-               fied  in  Schedule B, from any source  in  the               State and uses them in the State in the  manu-               facture of any other goods and either disposes               of  the manufactured goods to a place  outside               the State in any manner otherwise than by  way               of sale in the course of inter-State trade  or               commerce  or in the course of  export  outside               the  territory of India within the meaning  of               Sub-section  (1) of Section 5 of  the  Central               Sales Tax Act, 1956; or",               (ii)  after clause (b), the  following  clause               shall  be  deemed to have been  inserted  with               effect from the 9th day of April, 1979,  name-               ly:               "(bb) purchases goods, other than those speci-               fied  in  Schedule  B except  milk,  from  any               source in the State and uses them in the State               in  the  manufacture of any  other  goods  and               either  disposes of the manufactured goods  in               any  manner otherwise than by way of  sale  in               the State or despatches the manufactured goods               to  a  place outside the State in  any  manner               otherwise than by way of Sale in the course of               inter-State trade or commerce or in the course               of  export  outside  the  territory  of  India               within  the  meaning  of  Sub-Section  (1)  of               Section 5 of the Central Sales Tax Act,  1956;               or";               528               {iii)  the following proviso shall  be  added,               namely:               "Provided that no tax shall be leviable  under               this section on scientific goods and guar gum,               manufactured  in the state and sold by him  in               the course of export outside the territory  of               India within the meaning of Sub-section (3) of               Section  ....  of the Central Sales  Tax  Act,               1956."; and               (b) in sub-section (3), the words "other  than               Railway premises" shah be omitted."     After  the aforesaid amendment the writ  petitions  were filed in the High Court by Bata India Ltd. In the  meantime, the  petitioner  Company also filed writ petitions  for  the assessment years 1973-74 to 1975-76 and 1980-81 in the  High

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Court  challenging  the assessment. The High  Court  decided these  matters  on August 2, 1983. The  said  decision  Bata India Ltd. v. The State of Haryana & Anr. has been  reported in  1983  Vol. 54 STC 226. The High Court  held  that  "mere despatch of goods to a place outside the State in any manner otherwise  than by way of sale in the course of  inter-State trade  or  commerce" is synonymous with or is  in  any  case included within the ambit of the consignment of goods either to the person making it or to any other person in the course of  inter-State  trade or commerce as specified  in  Article 269(1)(h)  and Entry No. 92-B of List 1 of the 7th  Schedule to  the Constitution. Hence, the levy of sales  or  purchase tax  on such a despatch or consignment of goods and  matters ancillary  or subsidiary thereto, will be within the  exclu- sive  legislative  competence  of Parliament  to  the  total exclusion  of  the  State  Legislature.  Therefore,  section 9(1)(b)  of  the  Haryana General Sales Tax  Act,  1973,  as amended by the Haryana General Sales Tax (Amendment &  Vali- dation)  Act, 1983, insofar as it levies a purchase  tax  on the consignment of goods outside the State in the course  of inter-State  trade  or commerce is  beyond  the  legislative competence of the State of Haryana and is void and  inopera- tive.  It was held that the retrospective validation of  the notification  of 19th July, 1974 referred  to  hereinbefore, and the consequential validation of all actions taken there- under were liable to be quashed. The High Court further held that  mere manufacture and consignment of goods outside  the State  to himself by a manufacturer is not sale or  disposal thereof with the result that it will not be within the ambit of  Entry No. 54 of List II of the 7th Schedule to the  Con- stitution.  Consequently, it was held that  irrespective  of the  46th Amendment, an attempt to tax the mere  consignment or  despatch of manufactured goods outside the State in  the course of inter-State trade 529 or  commerce will not come within the ambit of Entry No.  54 of  List  II of the 7th Schedule, and  consequently  of  the competence of the respective State Legislatures. Even before the  46th  Amendment, the mere consignment of goods  in  the course of inter-State trade or commerce was beyond the scope of the said Entry and thus not within the legislative compe- tence  of the States and was entirely within the  parliamen- tary field of. legislation by .virtue of Article 248 and the residuary Entry No. 97 of List I.     The High Court was of the view that neither the original purchase of goods nor the manufacture thereof into the  end- product by itself attracts purchase tax and consequently are not  even  remotely the taxable events.  What  directly  and pristinely attracts the tax and can be truly labelled as the taxing event under section 9(1)(b) of the Act is the  three- fold exigency of; (i) disposal of the manufactured goods  in any  manner otherwise than by way of sale in the  State;  or (ii)  despatch of the manufactured goods to a place  outside the State in any manner otherwise than by way of sale in the course of inter--State trade or commerce, or (iii)  disposal or  despatch  of  the manufactured goods in  the  course  of export  outside the territory of India. It was  these  three exigencies only which were the taxable events in the amended section 9(1)(b) of the Act. Consequently, in a Statute where the  taxable event is the despatch or consignment  of  goods outside  the State, the same would come squarely within  the wide  sweep of Entry No. 92B of List I of the  Constitution, and thus excludes taxation by the States.     The High Court was of the view that section 9 of the Act must be strictly construed as it was a charging section.  If

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the  charging section travels beyond the  legislative  Entry and  thereby  transgresses the legislative field,  then  the same  cannot  possibly  be  sustained.  The   constitutional changes  brought  by the 46th Amendment in Art. 269  of  the Constitution read with the insertion of Entry No. 92B in the Union List, leave no doubt that the legislative arena of tax on the consignment of goods (whether to one’s ownself or  to any  other  person) in the course of  inter-State  trade  or commerce and all ancillary or complementary or consequential matters,  are  now declared to be exclusively  reserved  for parliamentary legislation and any intrusion into this  field by the State Legislatures would be barred.     In  my  opinion, the High Court correctly noted  in  the said  decision that the provisions of constitutional  change have to be construed, and such problems should not be viewed in narrow isolationism but on a much wider. spectrum and the principles laid down in Heydon’s case 530 1584 3 Co. Rep 7a are instructive. Hence, in a situation  of this  nature,  it was just and proper to see  what  was  the position before the 46th Amendment of the Constitution,  and find  out what was the mischief that was sought to be  reme- died and then discover the true rationale for such a remedy. In Black-Clawson International Ltd. v. Papierwerke  Waldhof- Aschaffenburg  Ag., [1975] 1 All ER 810, Lord Reid  observed as follows:               "One must first read the words in the  context               of the Act as a whole, but one is entitled  to               go beyond that. 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 relevant facts known to them when               the document was made. The same must apply  to               Acts  of Parliament subject to one  qualifica-               tion.  An Act is addressed to all  the  lieges               and  it would seem wrong to take into  account               anything that was not public knowledge at  the               time. That may be common knowledge at the time               or it may be some published information  which               Parliament  can  be presumed to  have  had  in               mind.                         It has always been said to be impor-               tant  to consider the mischief which  the  Act               was  apparently intended to remedy.  The  word               ’mischief’  is traditional. I would expand  it               in  this way. In addition to reading  the  Act               you look at the facts presumed to be known  to               Parliament when the Bill which became the  Act               in  question was before it, and  you  consider               whether there is disclosed some unsatisfactory               state of affairs which Parliament can properly               be supposed to have intended to remedy by  the               Act  ...."     The  state of affairs that the Parliament has sought  to remedy  by the 46th Amendment of the Constitution, was  that prior  to the promulgation each State attempted  to  subject the same transaction to tax on the nexus doctrine under  its sales  tax  laws. Consequently, on the basis of one  or  the other element of the territorial nexus, the same transaction had  to suffer tax in different States with  the  inevitable hardship  to  trade and consumers in the same  or  different States. The framers of the Constitution being fully aware of the problems sought to check the same by a somewhat  complex constitutional  scheme and by imposing restrictions  on  the States’  power with regard to levy tax on the sale  or  pur-

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chase  of goods under Art. 286. The High Court in the  judg- ment  referred to hereinbefore, mentioned these factors.  It is in 531 this background that Art. 269 was amended and clause (3) was added  to it. The effect, inter alia, is that the  power  to levy  tax on the sale or purchase of goods is now  referable to  the legislative power vested in the States by virtue  of Entry  No. 54 in List II of the 7th Schedule. However,  this legislative  authority of the States is restricted by  three limitations  contained  in Articles 286(1)(a),  286(1)(b)  & 286(3) of the Constitution. It may be mentioned that Parlia- ment  by the 6th Amendment to the Constitution, enacted  the Central  Sales Tax Act, 1956, with the object  to  formulate principles for determining when a sale or purchase of  goods takes  place in the course of inter-State trade or  commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and  distri- bution  of taxes on sales of goods in the course  of  inter- State  trade or commerce and to declare certain goods to  be of  special  importance  and specify  the  restrictions  and conditions to which State laws imposing taxes on the sale or purchase of such goods shall be subject. In this connection, the  High  Court  referred to the  various  propositions  as mentioned by the Law Commission in its 61st Report  rendered in  May,  1974. It is not necessary to set out the  same  in detail.  It was in the aforesaid historical background  that the High Court construed the provisions in question and came to the conclusion that a plain reading of these would  leave little  manner  of doubt that the legislative power  to  tax consignment transfers of goods from one branch of an  insti- tution  to another branch thereof outside the State and  all matters incidental, ancillary or complementary thereto  were then  declared  to be vested in the Union of  India  to  the total  exclusion of the States. The High Court  referred  to the observations of this Court in Khyerbari Tea Co. Ltd.  v. State  of Assam, AIR 1964 SC 925; Navinchandra  Mafatlal  v. The Commissioner of Income-tax, Bombay City, [1955] SCR  829 and  Waverly  Jute Mills Co. Ltd. v. Raymon & Co.  (1)  Pvt. Ltd., [1963] 3 SCR 209, and concluded that Entry 92B enabled the Union of India not only to tax the consignment of  goods in  the  strict sense but also embraced  all  ancillary  and complementary  areas as well to the exclusion of  the  State Legislature therefrom. In the aforesaid light the High Court construed  section 9(1)(b) of the Haryana Act, 1983.  Analy- sing the provisions in detail it observed that Section 9  of the Act was a charging section for the levy of purchase tax. It imposed liability for payment of purchase tax, therefore, it  should be distinguished from the machinery section.  The High Court examined the real nature of the business  outside the  State and found that there was merely a change  in  the physical situs of the goods without any change in the  basic incidents  of ownership and control. Therefore, in its  true nature a mere despatch of goods outside the State to another branch of the original institution is not and never 532 can  be the equivalent of a sale either as a term of art  in the  existing sales tax legislation and not remotely  so  in common parlance, and construing section 9(1)(b) of the  Act, the High Court was of the view that the real taxing event is the  despatch of the manufactured goods to a  place  outside the,  State in any manner otherwise than by way of  sale  in the course of inter-State trade or commerce.     The  High  Court  found that there  was  no  distinction between the despatch as defined in the said amended  section

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and the consignment of goods by the manufacturer to  himself or  any other person in the course of inter-State  trade  or commerce,  and referred to the meanings of  the  expressions ’despatch’  and  ’consign’,  which are  similar  and  almost interchangeable when used in specific commercial sense.  The High Court referred to Webster’s New International  Diction- ary,  Shorter Oxford English Dictionary and also  to  Random House  dictionary for their meanings. On  construction,  the High  Court came to the conclusion that the  amended  provi- sions  of  section  9(1)(b) of the Act attempt  to  levy  an identical  tax  in  the garb of a levy on  the  despatch  of manufactured  goods to places outside the State of  Haryana, and  therefore intruded and trespassed into an arena  exclu- sively  meant for taxation by the Union of India.  The  High Court  also viewed from another point of view,  namely,  who was liable as it was the consignment of goods which attract- ed the liability of purchase tax and in pristine essence was the  "taxable event" under section 9(1)(b) of the  Act.  The High  Court  also analysed it from the point  of  view  that under  section 9(1)(b), where a dealer purchases  goods  for the express purpose of manufacturing other goods within  the State, then in strict sense such purchase by itself did  not attract any tax under the provisions. Hence, the High  Court set aside the amended provision so far as it sought to  levy purchase  tax on the consignment of goods outside the  State in the course of inter-State trade or commerce, consequently it also set aside the retrospective validation of the  noti- fication  and  the consequential validation of  all  actions taken thereunder. Special leave petitions were filed in this Court against the said decision of the High Court. These are special  leave petitions Nos. 8397 to 8402 of  1983.  During the  pendency  of the special leave  petitions,  show  cause notices were issued by the assessing authority in respect of the assessment years 1973-74 to 1980-81 (except for  1978-79 &  1979-80)  and also for 1982-83 asking the  petitioner  to show cause why in addition to purchase-tax, it should not be liable  to  penalty as well.  The  petitioner-Company  again filed  writ petitions in Punjab & Haryana High  Court  chal- lenging  the validity of those notices. It appears  that  in the  meantime,  a Full Bench of the High Court  decided  the question again in the case of Des Raj Pushap 533 Kumar  Gulati v. The State of Punjab & Anr..  This  decision was rendered on January 24, 1985, and is reported in 58  STC 393. The assessment years involved in all appeals are  1973- 74 to 1982-83. According to the Full Bench, the taxing event is  the act of purchase and not the Act of despatch or  con- signment  as held in Bata India Ltd., (supra). In the  prem- ises,  it  was  held that section 9(1)(b)  as  amended,  was neither  invalid nor ultra vires and overruled the  decision of  Bata India Ltd. The writ petitions filed were also  dis- missed.     The  petitioner-Company  filed special  leave  petitions against the aforesaid judgment of the Punjab & Haryana  High Court which were admitted in Civil Appeals Nos.  1166-72/85. Goodyear India also filed writ petition No. 3834 of 1985  in respect  of the assessment year 1981-82, as the notices  for assessment  and penalty were received after the decision  of Punjab  & Haryana High Court in Des Raj Pushap Kumar’s  case (supra). The said decision was passed in appeal against  the decision of the said court in Goodyear India reported in  53 STC 163, number being 1514 (NT) of 1984. All these questions are the subjectmatters of these appeals.     It  is  well-settled that what is the taxable  event  or what  necessitates taxation in an appropriate Statute,  must

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be  found  out by construing the provisions.  The  essential task  is to find out what is the taxable event. In  what  is considered to be indirect tax, there is a marked distinction between  the consequence of manufacture and the  consequence of sale.     It  is well to remember that in construing  the  expres- sions  of the Constitution to judge whether  the  provisions like  Section 9(1)(b) of the Act, are within the  competence of  the  State Legislature, one must bear in mind  that  the Constitution is to be construed not in a narrow or  pedantic sense.  Constitution is not to be construed as mere law  but as  the machinery by which laws are to be made. It  was  ob- served by Lord Wright in James v. Commonwealth of Australia, [1936]  AC  578 at 614, that the rules which  apply  to  the interpretation of other Statutes, however, apply equally  to the  interpretation of a constitutional enactment.  In  this context,  Lord  Wright referred to the observations  of  the Australian High Court in The Attorney-General for the  State of  New  South Wales v. The Brewery  Employees  Union  etc., [1908] 6 CLR 469 where it was observed that the words of the Constitution  must be interpreted on the same principles  as any ordinary law, and these principles compel us to consider the  nature and scope of the Act, and to remember  that  the Constitution is a mechanism under which laws 534 are  to be made, and not a mere Act which declares what  the law  is to be. Hence, such mechanism should  be  interpreted broadly,  bearing  in mind in appropriate  cases,  that  the Supreme Court like ours is a nice balance of  jurisdictions. A  Constitutional  Court, one must bear in  mind,  will  not strengthen, but only derogate from its position if it  seeks to  do  anything  but declare the law; but  it  may  rightly reflect  that a Constitution is a living and organic  thing, which  of all instruments has the greatest claim to be  con- strued broadly and liberally. See the observations of Gwyer, C.J. in Re: Central Provinces & Berar Sales of Motor  Spirit and Lubricants Taxation Act, 1938, AIR 1939 PC 1 at 4).  Mr. Justice  Sulaiman  in his judgment at p. 22  of  the  report observed  that the power to tax the sale of goods  is  quite distinct  from any right to impose taxes on use or  consump- tion. It cannot be exercised at the earlier stage of produc- tion nor at the later stage of use or consumption, but  only at the stage of sale, (emphasis supplied). The essence of  a tax  on goods manufactured or produced is that the right  to levy it accrues by virtue of their manufacture. On the other hand,  a duty on the sale of goods cannot be  levied  merely because goods have been manufactured or produced. Nor can it be  levied  merely because the goods have been  consumed  or used or even destroyed. The right to levy the duty would not at  all come into existence before the time of the sale.  In this  connection, reference may be made to the  observations of  Chief  Justice Gwyer in The Province of Madras  v.  M/s. Boddu Paidanna & Sons, AIR 1942 FC 33.     Mr   Raja   Ram  Agarwala,  learned  counsel   for   the appellant/assessees,  contended before us that it is  neces- sary to find out or identify the taxable event. If on a true and proper construction of the amended provisions of section 9(1)(b) it is the despatch or consignment of the goods  that is  the  taxable event as contended by the  petitioners  and appellants, then the power is beyond the State’s competence. If, on the other hand, it is the purchase of the goods  that is  the taxable event as held by the Full Bench of the  High Court, then it will be within its competence. The Full Bench in  Des  Raj Pushap Kumar’s case (supra) has relied  on  the background of the facts and the circumstances which necessi-

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tated the introduction of the amendment.     Mr.  Tewatia,  learned counsel appearing for  the  State canvassed  before us the historical perspective  and  stated that Haryana State came into being as a result of the Punjab State  Reorganisation  Act,  1966, therefore,  part  of  the legislative  history  of the taxing Statute like  any  other Statute  is  shared  by the Haryana State  with  the  Punjab State,  and  as such it is proper to notice the  concept  of purchase tax as it 535 evolved in the State of Punjab. Purchase-tax was  introduced in the State of Punjab for the first time by the East Punjab General  Sales Tax (Amendment) Act, 1958. Section 2(ff)  was introduced  for  the  first time to  define  the  expression ’purchase’. The definition of the term ’dealer’ was  changed to include therein a purchaser of goods also. The definition of the term ’taxable turnover’ was also altered. Some  deal- ers who crushed oil-seeds, were called upon to pay  purchase tax on the raw-material purchased by them on the ground that the  raw material had not been subjected to a  manufacturing process as the process of crushing oil-seeds did not involve a  process  of manufacturing. He referred to the  fact  that Punjab had originally exempted purchase tax on the  purchase of  raw-material by the dealers if such raw-material was  to be used for the manufacture of goods for sale in Punjab  and thus  generate more revenue to the State as a result of  the sales  tax on such manufactured goods. But when the  dealers started  avoiding this condition for sale in Punjab by  var- ious  ingenious devices after having escaped the payment  of purchase  tax  on the raw-material purchased  by  them,  the Legislature  amended the Act and Punjab Act No. 18  of  1960 was  brought on the statute-book w.e.f. April 1, 1960.  Sec- tion  2(ff) of the Act was amended and it provided that  all the  goods mentioned in Schedule C when purchased  shall  be exigible  to purchase tax and thus the concession  given  to the manufacturers was withdrawn. Explaining this background, Mr. Tewatia contended that section 9, sub-section (i) of the Act envisages payment of tax at such rate as may be notified under  Section 15 on the purchase of goods from  any  source within the State by a dealer liable to pay tax under the Act when such goods, not being Schedule ’B’ goods, were consumed either in producing Schedule ’B’ goods or when the  manufac- tured goods were other than Schedule ’B’ goods, the same not being sold within the State or in the course of  inter-State trade  or commerce, or in the course of export  outside  the territory  of  India, or the purchased goods  were  exported outside the State.     After  referring  to  the relevant  provisions  and  the provisions  of section 9(1)(b), Mr Tewatia  emphasised  that the contingency contemplated by "or despatches the  manufac- tured  goods  to  a place outside the State  in  any  manner otherwise  than by way of sale in the course of  inter-State trade  or  commerce or in the course of export  outside  the territory of India within the meaning of section 5(1) of the Central  Sales Tax Act, 1956; or" as well as clause  (c)  of section 9(1) which encompasses "purchases goods, other  than those specified in Schedule B, from any source in the  State and  exports them, in the circumstances in which no  tax  is payable under any other provision of 536 this  Act, there shall be levied, subject to the  provisions of  Section 17, a tax on the purchase of such goods at  such rate  as  may  be notified under Section 15.",  have  to  be judged for determining their validity in the true historical perspective  as well as bearing in mind the remedial  aspect

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of the provisions for the purpose of which these were enact- ed.  Therefore, the main question is whether the tax  envis- aged  by  section 9(1) is a tax on  purchase/sale  of  given goods or is a tax on the despatch/ consignment of such goods and  that depends on, as to whether the taxable event  is  a purchase/sale  of  goods  or  despatch/consignment  of  such goods.  As  mentioned hereinbefore, Mr. Tewatia  laid  great deal  of  emphasis on the background of  the  provisions  of section  9(1).  He  urged that the said section  is  both  a taxing as well as a remedial provision, as would be  evident from  the scheme of the Act. The legislative policy  was  to see  that all goods except non-taxable goods  i.e.  Schedule ’B’ goods, must yield tax/revenue to the State in the  hands of  a  dealer, at one stage or the other, according  to  Mr. Tewatia. He analysed the scheme and referred us to section 6 along  with section 27 of the Act, and then  submitted  that the  provision of section 9(1) along with subsection (3)  of section  24 of the Act are both composite  provisions,  i.e. they  are both charging provisions as also  remedial  provi- sions.  According  to him, such composite  provisions  of  a fiscal  Statute  deserve to be interpreted properly  and  in such  a manner as to further remedy and thus effectuate  the legislative intent and suppress the mischief intended to  be curbed.     Reliance  was  placed by the High Court as well  as  Mr. Tewatia  before us on the observations of this Court in  The State of Tamil Nadu v. Kandaswami, (supra), where at p.  198 of  the Sales Tax Cases, this Court while dealing with  sec- tion 7A of the Tamil Nadu (Amendment) Act, observed that  it was at once a charging as well as a remedial provision.  Its main object was to plug leakage and prevent evasion of  tax. In interpreting such a provision, a construction which would defeat  its purpose and, in effect, obliterate it  from  the statute book, should be eschewed. If more than one construc- tion  is possible, that which preserves its workability  and efficacy is to be preferred to the one which would render it otiose  or sterile, observed this Court in that case.  While bearing the aforesaid principle in mind, it has to be  exam- ined as to how far the application of this provision can  be construed with the well-settled principle of fiscal legisla- tion  and the terms and conditions of the  present  legisla- tion.  It has been said and said on numerous occasions  that fiscal laws must be strictly construed, words must say  what these  mean,  nothing should be presumed or  implied,  these must say so. The true test must always be the language used. 537     On behalf of the assessee, Mr. Rajaram Agarwala,  howev- er,  further contended that the ratio of  Kandaswami’s  case (supra) to which Mr. Tewatia referred, must be understood in the  light of the question involved in that case.  The  said decision of this Court was concerned with the limited  point as  to whether the Madras High Court was right in  observing "whether  one could say that the sale which is  exempted  is liable to tax and then assume that because of exemption, the tax  is not payable". This Court held that the  language  of section  7A  of the said Act was far from clear  as  to  its intention and did not concern with the identification of the taxing  event. Furthermore, it has to be borne in  mind,  as emphasised by Mr. Agarwala, that if at all the taxing  event was  spelt out, it was on the assumption that the  goods  in question were generally taxable and these were to be put  to tax under section 7A of the Tamil Nadu Act, if these came to be  purchased without payment of tax and then sought  to  be dealt  with  in  any manner as to escape  payment  of  State sales/purchase tax within the State.

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   Mr.  Tewatia drew our attention to the  observations  of this  Court in Kandaswami’s case (supra) to prove  that  the observations in Malabar Fruit Products Co. v. The Sales  Tax Officer,  Palai,  30  STC 537, where  these  questions  were decided by Justice Poti of the Kerala High Court, who  spelt out that the taxing event was not the event of despatch  but the event of purchase/sale of goods. It has, however, to  be borne  in mind that the questions involved in Malabar  Fruit Products’  case and Kandaswami’s case (supra) were not  con- cerned with the actual argument with which we are  concerned in  the instant matter. It is well-settled that a  precedent is  an authority only for what it actually decides  and  not for what may remotely or even logically follows from it. See Quinn  v. Leathem, [1901] AC 495 and The State of Orissa  v. Sudhansu  Sekhar Misra & Ors., [1968] 2 SCR 154.  Therefore, the ratio of the said decision cannot be properly applied in construing the provisions of section 9(1)(b) in this case to determine what is the taxable event.     It was contended by Mr. Rajaram Agarwala that clause (b) of  Section 9(1) dealt with non-exempted goods purchased  in the  State,  used in the manufacture of  any  goods  whether exempted  or not, but when despatched outside the  State  of Haryana  i.e.  by  way of stock  transfer  consignment  will attract  the  tax liability under this section,  hence,  the event  of  despatch or consignment is  the  immediate  cause which attracts the tax liability under section 9. The quali- ty  or the character of goods which should be liable to  tax under  section 9 in clause (1)(a) is the non-exempted  goods purchased in the State; while 538 under  the  first part of clause (b) the  quality  of  goods liable  to  tax is the non-exempted goods purchased  in  the State  and under the second part of clause (b), the  quality of  goods must be non-exempted goods purchased and  manufac- tured  in  the State, whether exempted or not in  the  State which  is  liable to tax on despatch  outside  Haryana;  and under  clause  (c) the goods purchased  in  Haryana  without undergoing any further change or use is the quality of goods liable to tax when exported.     The submission of the State is that the taxable event is the purchase of goods in Haryana while the obligation to pay is  postponed on the fulfilment of certain  conditions.  The further  argument  is that there is a general  liability  to purchase tax which the dealer avoids on furnishing a  Decla- ration in S.T. Form 15 as provided by section 24 at the time of  purchase, wherein certain conditions are  mentioned  and when  those conditions are not fulfilled, those  revive.  It was  further argued that the conditions are incorporated  in section  9 of the Act. For testing which of the  contentions are  nearer  to find out the exact  taxable  event,  certain indicias and illustrations may be seen. Their analysis  will indicate  that there is no liability to pay sales tax  under the  Haryana  Act on the purchaser. It is admitted  that  on such sales the selling dealer is liable to pay sales-tax. On such purchases, the sale and purchase being the two sides of the  same  coin, no purchase tax is imposed under  the  Act. This  has been the accepted position by the State also  for, while  replying to the question of double  taxation  counsel for the State admitted that sales as well as purchase tax is to  be imposeable under the scheme of the Act which  are  of two sides. Hence, it was rightly urged by Mr. Rajaram  Agar- wala  that the first contention for attracting the  applica- bility  of section 9(i), "whether a dealer is liable to  pay tax  under  this Act purchases goods", is missing  when  the section  (1) talks of a dealer liable to pay tax  under  the

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Act, obviously it is with reference to his purchasing activ- ity  and  if on that activity no purchase  tax  is  payable, section 9(1) would not be applicable.      To  accept  the submissions advanced  by  Mr.  Tewatia, assumptions  and  presumptions  are to be made.  It  is  not permissible  to  do so in a fiscal provision.  See  in  this connection  the observations of this Court in C.S.T.U.P.  v. The  Modi Sugar Mills Ltd., [1961] 2 SCR 189 and  Baidyanath Ayurved Bhawan (P) Ltd., Jhansi v. Excise Commissioner, U.P. & Ors., [1971] 2 SCR 590 at 592. In that background it  must be noted that section 9 of the Act nowhere makes a reference to section 24 or any declaration furnished by the purchasing dealer on the basis of which he was granted temporary exemp- tion and thereby revival of 539 the  original purchase tax on the breach of  declaration  as such. Section 9 of the Act opens with the expression  "where a dealer liable to pay tax under this Act" and not  "whether a  dealer  has  paid tax or has not paid  tax".  The  phrase ’liable  to pay tax’ under the Act must relate to  liability to pay sales tax on such purchases.     It  is well-settled that the main test  for  determining the  taxable  event is that on the happening  of  which  the charge  is  affixed. The realisation often is  postponed  to further date. The quantification of the levy and the  recov- ery  of  tax  is also postponed in some cases.  It  is  well settled  that  there are three stages in the  imposition  of tax. There is the declaration of liability, that is the part of the Statute which ’determines what persons in respect  of what  property  are liable. Next, there is  the  assessment. Liability  does not depend on assessment,  that  exhypothesi has  already been fixed. But assessment  particularises  the exact sum which a person is liable to pay. Lastly comes  the method of recovery if the person taxed does not  voluntarily pay.  Reference  may  be made to the  observations  of  Lord Dunedin in Whitney v. Commissioner of Inland Revenue, [1926] AC 37 at p. 52 and of the Federal Court in Chatturam &  Ors. v. C.I.T., Bihar, 15 ITR FC 302 at 308.     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 identi- fication  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  sec- tion 9(1)(b). The focal point in the expression "goods,  the sale  or purchase of which is liable to tax under the  Act", is the character and class of goods in relation to exigibil- ity. In this connection, reference may be made to the obser- vations  of  this Court in Andhra Sugars Ltd.  v.  State  of Andhra Pradesh, [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

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540 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 alleged purchase tax under  section  9, one  gets  the conclusion that the section itself  does  not provide  for imposition of the purchase tax on the  transac- tion  of purchase of the taxable goods but when further  the said  taxable goods are used up and turned into  independent taxable goods, losing its 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  that  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.     In this connection, reference may be made to the  obser- vations of Justice Vivian Bose in The Tata Iron & Steel  Co. Ltd.  v. The State of Bihar, [1958] SCR 1355 at 1381,  where he observed as follows:               "I would therefore reject the nexus theory  in               so far as it means that any one sale can  have               existence  and entity simultaneously  in  many               different places. The States may tax the  sale               but  may not disintegrate it, and,  under  the               guise of taxing the sale in truth and in fact,               tax its various elements, one its head and one               its  tail, one its entrails and one its  limbs               by  a legislative fiction that deems that  the               whole  is  within its  claws  simply  because,               after  tearing it apart, it finds a hand or  a               foot or a heart or a liver still quivering  in               its grasp. Nexus, of course, there must be but               nexus  of the entire entity that is  called  a               sale,  wherever  it is deemed to  be  situate.               Fiction  again. Of course, it is fiction,  but               it  is  a fiction as to situs imposed  by  the               Constitution Act and by the Supreme Court that               speaks  for it in these matters and  only  one               fiction, not a dozen little ones."     It  is,  therefore, necessary in all cases to  find  out what is the essence of the duty which is attracted. A  taxa- ble event is that which is closely related to imposition. In the  instant section, there is such close relationship  only with  despatch. Therefore, the goods purchased are  used  in manufacture of new independent commodity and thereafter  the said manufactured goods are despatched outside the State  of Haryana. In this series of transactions the original  trans- action  is completely eclipsed or ceases to exist  when  the levy  is imposed at the third stage of despatch of  manufac- ture. In the instant case the levy has no direct  connection with  the transaction of purchase of raw-materials,  it  has only  a remote connection of lineage. It may  be  indirectly and very 541 remotely  connected with the transaction of the purchase  of raw-material wherein the present levy would lose its charac- ter of purchase tax on the said transaction.     Mr.  Rajaram Agarwala submitted that the measure of  tax is  with  reference to the value of purchased goods  in  the State  of Haryana. As mentioned before, reference  has  been made  to  the decision of Kandaswami’s case  (supra),  where this  Court  dealt with section 7A of the  Tamil  Nadu  Act, which was not identical but similar to section 9 of the Act. There  at p. 196 of the report, this Court observed as  fol- lows:               "...  Difficulty  in interpretation  has  been

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             experienced  only with regard to that part  of               the  sub-section which relates to  ingredients               (4)  & (5). The High Court has taken the  view               that  the expression "goods, the sale or  pur-               chase  of  which is liable to tax  under  this               Act", and the phrase "purchases ... in circum-               stances  in  which  no tax  is  payable  under               Sections  3,  4 or 5 are a  "contradiction  in               terms".               Ingredients Nos. 4 & 5 are as follows:               "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 tax is payable under sections 3, 4 or               5, as the case may be;"                   The   relevant  ingredient  involved,   as               mentioned at page No. 196, was as under:               "6. The dealer either--               (a) consumes such goods in the manufacture  of               other goods for sale or otherwise or               (b)  despatches all 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." This  ingredient was neither argued nor was  considered,  so the 542 passing reference based on the phraseology of the section is not the dictum of Kandaswami’s case. Secondly, in section 9, in the instant case, the raw-materials purchased or used  in the manufacture of new goods and thereafter those new  goods were  despatched outside the State of Haryana whereupon  the tax  was levied. This important factor is wholly missing  in Section  7A of the Tamil Nadu Act, which was  considered  in Kandaswami’s case. In that decision, this Court approved the Kerala  High  Court’s decision in  Malabar  Fruit  Products, (supra),  which  was confined to the interpretation  of  the words  ’goods’, the sale or purchase under the Act. A  deci- sion  on  a  question which has not been  argued  cannot  be treated  as a precedent. See the observations of this  Court in Rajput Ruda Maha & Ors. v. State of Gujarat, [1980] 2 SCR 353 at 356. The decision of the Division Bench of the Kerala High  Court  in Yusuf Shabeer & Ors. v. State  of  Kerala  & Ors.,  32  STC  359 is clearly  distinguishable.  In  Ganesh Prasad  Dixit’s case (supra) the question of  constitutional validity was not argued. A reference was made by Mr. Tewatia to  the  decision of the High Court in The Coffee  Board  v. Commissioner of Commercial Taxes & Ors., 60 STC 142 and  the decision of this Court in Coffee Board, Karnataka v. Commis- sioner of Commercial Taxes, Karnataka, 70 STC 162. In  these cases the question involved was the acquisition of coffee by the Coffee Board under compulsory acquisition or purchase or sale of goods. That question is entirely different from  the question with which we are concerned in these appeals.     Prior  to 46 the Amendment, Entry 54 of List II  of  the 7th  Schedule of the Constitution of India which  demarcated the exclusive field of State Legislation, read with  Article 246(3)  of  the Constitution conferred power  on  the  State Legislature  to  impose tax on the transactions of  sale  or purchase of goods. The said Entry read as follows:--               "Taxes on the sale or purchase of goods  other               than Newspapers, subject to the provisions  of

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             Entry 92-A of List I".     Entry 92A of List I, which is in the exclusive domain of the Union, was to the following extent:               "Taxes on the sale or purchase of goods  other               than  Newspapers, where such sale or  purchase               takes place in the course of inter-State trade               or commerce."     The  mere consignment of goods by a manufacturer to  his own branches outside the State does not in any way amount to a sale or 543 disposal  of the goods as such. The consignment or  despatch of  goods is neither a sale nor a purchase. The first  judg- ment in case of Goodyear India was on December 4, 1982  when it was held that the Notification was beyond the Act, as the word ’disposal’ did not include the word ’mere despatch’  as mentioned in the notification. The Constitution (46th Amend- ment) Act, 1982 came into force on February 2, 1983, whereby section 9 was amended. This amendment was after 46th Consti- tutional  Amendment Act, 1982. The 46th Constitution  Amend- ment Act in the Statement of Objects & Reasons, inter  alia, stated as follows:               "There  were reports from State Government  to               whom  revenues  from sales-tax have  been  as-               signed,  as  to the large scale  avoidance  of               Central  Sales  Tax  leviable  on  inter-State               sales of goods through the device of  consign-               ment of goods from one State to another and as               to  the  leakage of local Sales Tax  in  works               contracts,  hire purchase transactions,  lease               of films etc. Though, Parliament could levy  a               tax on these transactions, as tax on sales has               all  along been treated as an item of  revenue               to  be  assigned to the States, in  regard  to               these  transactions  which  are  semble  sales               also,  it is considered that the  same  policy               should be adopted."     The Law Commission of India in its 61st Report made,  as indicated before, certain recommendations, and noticed  that the provisions of existing Central Sales Tax Act were insuf- ficient  to  tax the consignment transfers  from  branch  to another,  as  it  was beyond the concept of  sale,  and  its recommendations  are contained in paragraph 2.23 of  Chapter II (at page 66), it recommended that the definition of  sale in the Central Sales Tax Act, after carrying out the  requi- site Constitution Amendment be amended somewhat on the lines indicated  by them in their report. The Union of  India,  in part,  accepted the recommendations but instead of  amending the definition of sales in Central Sales Tax Act, inserted a new  Entry in the Union List in the shape of Entry  92B  and also  inserted a new sub-clause (4) after subclause  (g)  in Art. 269 (1) of the Constitution. The Parliament also amend- ed clause (3) of Article 269.     It appears to us that the effect of the aforesaid amend- ment  is that the field of taxation on the  consignment/des- patch  of goods in the course of inter-State trade  or  com- merce  expressly come within the purview of the  legislative competence  of  the Parliament. It is wellsettled  that  the nomenclature of the Act is not conclusive and for 544 determining  the true character and nature of  a  particular tax,  with  reference  to the legislative  competence  of  a particular  Legislature, the Court will look into  its  pith and  substance. See the observations of Governor General  in Council v. Province of Madras, [1945] 72 IA 91. There,  Lord

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Simonds observed as follows:               "   .....  For in a Federal  Constitution,  in               which  there  is  a  division  of  legislative               powers between Central and provincial legisla-               tures it appears to be inevitable that contro-               versy  should  arise;  Whether  one  or  other               legislature  is  not exceeding  its  own,  and               encroaching   on  the  others   Constitutional               Legislative  Power, and in such a  controversy               it  is a principle, which their  Lordships  do               not  hesitate  to apply in the  present  case,               that  it is not the name of the tax,  but  its               real nature, "it is pith and substance", as it               has some times been said which must  determine               into what category it fails."     We  must,  therefore, look not to the form  but  to  the substance  of the levy. See the observations of the  Federal Court in Ralla Ram v. The Province of East Punjab, AIR  1949 FC 81.     Therefore, the nomenclature given by the Haryana  Legis- lature is not decisive. One has to find out whether in  pith and substance, a consignment tax is sought to be imposed,  a tax  on despatch in the course of inter-State trade or  com- merce.  I have no hesitation in holding that it is a tax  on despatch. Inter-state trade or commerce, it has been  empha- sised,  is of great national importance and is vital to  the federal  structure  of  our country. As  the  imposition  of consignment tax requires very deep consideration of all  its aspects  and  certain amount of consensus among  the  States concerned,  especially  with regard to the rates,  grant  of exemption,  and ratio relating to distribution  of  proceeds amongst the States inter se, the actual imposition of tax is bound to take some time till an agreeable solution is found, but  that would not make the consignment tax to be  in  sus- pended  animation in the State, and make us hold that a  tax which is in essence a tax on consignment should be taxed  by the States by the plea either that otherwise there is  ample scope  of  evasion and further States are without  much  re- sources in these days when there is such a tremendous demand on the revenue of the States.     It is well settled that the Entries in the  Constitution only  demarcate  the legislative fields  of  the  respective legislatures and do 545 not  confer legislative powers as such. The tax on  despatch of goods outside the territory of the State certainly is  in the  course of inter-State trade or commerce, and  in  other words,  amounts to imposition of consignment tax, and  hence the latter part of section 9(1)(b) is ultra vires and void.     In  these cases, we are concerned with the  validity  of the latter part of section 9(1)(b) of the Haryana Act  which imposes a tax on despatch of manufactured goods outside  the territories  of  Haryana.  If it is  accepted  that  section 9(1)(b) is ultra vires, the penalty proceedings would  auto- matically  go as they are in substance, based on the  viola- tion  of section 9(1)(b) of the Act and the consequent  pro- ceedings  flowing therefrom. It is in that context  that  in writ petition No. 3834 of 1985, Mr. Soli Sorabjee urged that the  attempt  and action of the State in  imposing  tax  and attempt to penalise are bad.     In this connection, it may be mentioned that before  the Full  Bench of the Punjab & Haryana High Court on behalf  of the State, a statement was made, which has been recorded  in 58 STC 393 at p. 408, as follows:               "Counsel  appearing for the State  of  Haryana

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             made  a statement that if the Full Bench  held               that  Bata India Limited’s, case (1983)54  STC               226  did not lay down the correct law and  the               amendment  effected by Act No. 11 of  1984  to               Section 9 was intra vires, then the  provision               of sub-section (3) of section 24 regarding the               rate of tax shall not be enforced and only the               old rate will be leviable."     In  view  of  the aforesaid statement,  no  higher  rate except  the old rate admissible factually would be  applica- ble.     Section  24(3)  was introduced by the Haryana  Act  with retrospective effect from May 27, 1971, which is as follows:               "Notwithstanding any other provisions of  this               Act  or any Judgment, decree or order  of  any               Court or other authority to the contrary if  a               dealer who purchases goods, without payment of               tax under Sub-section (1) and fails to use the               goods  so purchased for the purpose  specified               therein  he shall be liable to pay tax on  the               purchase  value  of such goods, at  the  rates               notified under Section 15 without prejudice to               the provisions of Section 50 provided that the               tax               546               shall  not be levied where tax is  payable  on               such  goods under any other provision of  this               Act."     This provision without making any change in the substan- tive  provision purports to give a direction to  ignore  the judgment,  in  other words, purports to overrule  the  judg- ments, namely, Goodyear and Bata India, which is beyond  the legislative  competence  of the State Legislature  and  this provision is void in view of the decision of this Court. See Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipali- ty,  [1969] 2 SCC 283 at 286. For the same reason,  applying the main section instead of section 9(1), section 24  should also  fail  as amended. Civil appeal No. 15  15/84  is  also liable to be dismissed in view of the judgment of this Court in  Dy.  Commissioner of Sales Tax (Law), Board  of  Revenue (Taxes) v. M/s. Thomas Stephen & Co. Ltd., Quilon, [1988]  2 SCC  264,  where this Court observed  that  "disposal  means transfer  of  title in the goods to any other  person",  and therefore it would not include mere despatch to own self  or to  its  agents or to its branch offices or depots.  In  the premises, the decision of the Punjab & Haryana High Court in Goodyear  India  Ltd., 53 STC 163 is correct  on  merits  as well.     In  the aforesaid view of the matter, it cannot be  held that  section  9(1) and sub-section (3) of  section  24  are constitutionally valid.     In  civil  appeals Nos. 1633 (NT) of  1985  and  3033/86 which are the appeals by the Food Corporation of India,  Mr. Sen submitted that the FCI is a service agency of the  Govt. of  India  and  is discharging the  statutory  functions  of distribution of foodgrains by procuring/purchasing from  the surplus  States  and  despatching the same  to  the  deficit States in accordance with the policy of the Govt. of  India. He  further  submitted that the Corporation  procures  food- grains  from  the farmers through commission agents  in  the Mandis  of Haryana and despatch them to its own branches  in the deficit States of the country. The Corporation  branches in  the  recipient States supply these stocks to  the  State agencies/fair price shops and also pay tax as per the provi- sions of the Sales Tax law of the respective States. Some of

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the  stocks  are distributed within Haryana for  the  Public Distribution System (PDS) for which sales tax is charged and deposited with the Sales Tax depot as per the provisions  of the  Haryana General Sales Tax Act. In case the  stocks  are also  sold in the course of inter-State trade  or  commerce, central  sales tax is levied and deposited with the  Haryana Sales Tax authorities. Some of the grains are also  exported out  of India on which there is exemption on payment of  any tax. 547     In  fact,  the points at which the tax is to  be  levied have been indicated in Schedule ’D’ to the Act. It is  clear from the perusal of the Schedule that in case of Paddy,  the taxable  event is the last purchase. Similarly, in  case  of rice the taxable event is the first sale point in the State. In case of wheat and other cereals the point of taxation  is the last sale to the consumer by a dealer liable to pay  tax under the Act.     In  respect of inter-State despatch of wheat  and  other foodgrains  by FCI to its own branches, tax is attracted  at the  time of despatch under section 9(1)(c) of  the  Haryana Act.  Section  9  is, therefore, the  charging  section  for taxation  in case where the goods are purchased for  export. There  is no other provision for levy of purchase  or  sales tax in such cases of export. Incidentally, "export" has been defined in section 2(e) of the Act which reads as follows:               "2(e)  "export" means the taking out of  goods               from the State to any place outside it  other-               wise  than  by way of sale in  the  course  of               inter-State trade or commerce or in the course               of export out of the territory of India;"     No  tax  is payable under the Haryana Act  when  exports outside the State take place either in the course of  inter- State  sale or export out of the territory of India. No  tax is  therefore payable in regard to export outside India  but the  tax  is payable for sale in the course  of  inter-State trade and commerce i.e. under the Central Sales Tax Act.  It is  only  when  the goods are  despatched/consigned  to  the depots  of the FCI in other States that tax is levied  under section  9  of the Haryana Act. This is in addition  to  the sales  tax  paid  by the FCI on the sale of  grains  in  the recipient  States.  On perusal of sections 14 &  15  of  the Central Sales Tax Act, it becomes clear that wheat is one of the commodities specified as ’declared goods’ and in respect of which the intention is clear that the tax is payable only once on the declared goods. In the case of inter-State  sale if  any tax has been paid earlier on declared  goods  inside the  State the same is to be refunded to the dealer  who  is paying tax on such inter-State sales. On these  transactions no  tax is liable in the recipient State, while in  case  of inter-State  despatches,  the  tax is  leviable  twice.  The appeals  of. the FCI are confined to section 9(1)(c),  which insofar as it purports to tax export, is beyond the legisla- tive competence of the State of Haryana.     On  behalf  of the State in Bata Co. Ltd.  v.  State  of Haryana  (supra),  the submission of the State  was  on  the basis that it had power to tax consignment or despatches  of goods. But after the 46th Amend- 548 ment,  the  State Legislature is  incompetent  to  legislate about consignments/despatches otherwise than by way of  sale under  which  no purchase/sales tax is  leviable  under  the Haryana  Act. It is the Parliament alone which  is  legisla- tively competent to enact a legislation on consignment.      Now, it is necessary to deal with civil appeals Nos.  4

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162-63/85  which deal with the validity of section 13-AA  of the Bombay Sales Tax Act.      These  appeals  are by Hindustan Lever Ltd.  and  Wipro Products  the  appellants  herein. The  appellants,  at  all material  times,  manufacture, make and deal  in  vanaspati, soaps, etc., chemicals and agro-chemicals, and they used  to purchase various types of VNE oils for their manufacture  of vanaspati,  soaps and other products. Since  the  appellants had  a wide net of distribution of their products  all  over India,  they appointed 40 and more clearing  and  forwarding agents  in the country. The appellant used to  despatch  the goods so manufactured from their factory to the clearing and forwarding  agents. They also used to purchase VNE oils  and other  raw-materials and paid 4% tax by way of purchase  tax under section 3 of the Bombay Sales Tax Act, 1959 (hereinaf- ter called ’the Bombay Act’). The raw-materials are used  in the  manufacture of said goods and as the said  manufactured goods  are despatched outside the State to the several  dis- tributing agencies, the appellant companies were held to  be liable to pay, under section 13-AA of the Act, an additional tax @ 2% on purchase of the said goods.     The  question, therefore, that arises, is:  whether  the levy of additional tax at 2% under Section 13-AA of the  Act is  a tax on purchases failing under Entry 54 of List II  of the 7th Schedule or it is a tax on the despatch of  consign- ment of the manufactured goods outside the State. In case of latter,  the State Legislature will have no power to  impose any tax on such consignment or despatch of goods outside the State.  If  it  is the former, then it will  be  valid.  The question  is  that under the true constructions  of  section 13-AA of the Act, on which the imposition of tax is made, or in  other words, what is the incidence of that  taxation  or taxable event? In both these appeals, namely, civil  appeals No. 4162/ 88 and 4163/88, the appellants M/s Wipro  Products Ltd.  and Hindustan Lever Ltd. are contending that the  levy is  bad. The issue involved in both the appeals is the  con- stitutional  validity  and  legality of  the  provisions  of section 13-AA of the Act, which was introduced into the  Act by the Maharashtra Act XXVIII of 1982. The appellant 549 had a factory at Amalnar in Jalgaon district in the State of Maharashtra  wherein it uses non-essential oil purchased  by it for the manufacture and transport. The finished products, namely,  vanaspati manufactured by the appellant used to  be despatched to their various marketing depots in the State of Maharashtra,  Madhya  Pradesh,  Karnataka,  Andhra  Pradesh, U.P., Tamil Nadu and Kerala etc. On July 1, 1981 the rate of purchase tax payable on VNE oils (falling under Schedule  C, part I at Entry 35) purchased within the State of  Maharash- tra from non-registered dealers increased from 3% to 4%,  by the Maharashtra Act 32 of 1981.     Section 13-AA was introduced into the Act providing  for levy of 2% additional purchase tax on the purchase of goods, input  goods,  specified in part I of the  Schedule  from  a non-registered  dealer if such goods were used in the  manu- facture  of taxable goods within Maharashtra and  thereafter the manufactured goods were transferred outside  Maharashtra in the manner indicated in the said section.     The appellants filed writ petitions. An order was passed by  the  Bombay High Court on July 19, 1988  in  respect  of these  two writ petitions by the Wipro Products as  well  as Hindustan  Lever  Ltd.  The decision of the  High  Court  is reported in [1989] 72 STC 69.     Dismissing  the  petitions of the  appellants  the  High Court held that (i) three different phases are  contemplated

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in section 13-AA of the Act, namely, the initial purchase of the raw material, the consumption thereof in the manufacture of taxable goods, and the despatch of the manufactured goods outside the State. If the goods purchased remain in the same form  within the State, the question of  levying  additional tax  would not arise. The High Court came to the  conclusion that there was no ground to hold that the additional tax was levied on the despatch of goods and was unconnected with the initial  transaction of purchase, as it was required  to  be paid  in addition to the sales or purchase tax paid or  pay- able  in  respect of the same goods which had been  so  pur- chased before the conditions specified in section 13-AA  are fulfilled,  (ii) in the context of the other  provisions  of the  Act, a sort of concession is given at the time of  pur- chase on the quantum of tax payable on the purchase of goods which  fall under Part I of Schedule C. However, there is  a clear  mandate of law, which is clearly  understood  between seller  and buyer, that though tax at the concessional  rate is  paid,  the obligation to pay the additional tax  on  the happening  of certain events, namely, use of such  goods  in manufacture  of  finished goods, and  despatch  of  finished goods outside the State, is undertaken 550 by the purchaser; and (iii) implicit in the low rates of tax prescribed  on raw material attributable to goods in Part  I of  Schedule C is the condition precedent that to  avail  of this  concession  the goods in question are required  to  be sold  in  the State after being used in the  manufacture  of other  taxable  goods. The High Court, further, was  of  the opinion that a manufacturer who purchases raw-material at  a concessional rate on the strength of declaration in Form  15 cannot  transfer  the goods manufactured out  of  such  raw- material  outside the State. The High Court held that if  he does  so, he is liable to pay purchase tax at the full  rate on the raw material under section 14. According to the  High Court, similarly, a manufacturer who purchases goods covered in  Part III of Schedule C, uses them in the manufacture  of other  taxable goods which he despatches outside the  State, is  liable to pay tax at rates ranging from 6% to 15%.  Sec- tion 13-AA, therefore, far from being discriminatory, serves to wipe out any discrimination between the two categories of manufacturers  mentioned above and manufacturers  purchasing raw-material  covered by Part I of Schedule C, according  to the  revenue.  The High Court was of the  opinion  that  the additional purchase tax leviable under section 13-AA of  the Bombay Act, is on the purchase value of VNE oil used in  the manufacture  of goods transferred outside the State and  not on  the value of the manufactured goods so  transferred.  It further   held  that the tax levied under section  13-AA  of the  Bombay Act, falls squarely and exclusively under  Entry 54 of the State List in the 7th Schedule to the Constitution of India and the State Legislature was competent to levy it. It does not even remotely fall under Entry 92B of the  Union List, according to the High Court.     The High Court was also of the view that the goods taxed under  section 13-AA of the Bombay Act, are consumed in  the State  as  raw material in the process  of  producing  other commodities.  Hence, there was no question of any  hindrance to a free flow of trade bringing into operation Article  301 of the Constitution. According to the High Court, the  peti- tioners  had not brought forth any material to show how  the free flow of trade has been affected by this additional rate of  tax;  and  held that section 13AA is  not  violative  of Article 14 of the Constitution; and that section 13AA of the Bombay  Act and the orders requiring the appellants  to  pay

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additional  tax @ 2% on purchase of VNE oil used by them  as raw-material in the manufacture of goods despatched  outside the State, were valid.     The High Court in the judgment under appeal has set  out the  relevant  provisions of the Act, which was  enacted  to consolidate and 551 amend  the law relating to levy of tax on the sale  or  pur- chase  of  certain goods in the State of Bombay.  Section  2 contains  some  of the definitions. Section  24  deals  with authorisations  of turnover etc. Section 13AA of the  Bombay Act  with  which the High Court and these appeals  are  con- cerned, is in the following terms:               "13-AA.  Purchase  tax  payable  on  goods  in               Schedule  C, Part I, when  manufactured  goods               are transferred to outside branches.                         Where a dealer, who is liable to pay               tax under this Act, purchases any goods speci-               fied  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  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 sales  tax  paid  or               payable,  or as the case may be, the  purchase               tax levied or leviable under the other  provi-               sions  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  pur-               chases  in his return under section 32,  which               he is to furnish next thereafter."     The  questions  involved in these appeals  are:  whether section  13AA  of the Bombay Act is beyond  the  legislative competence of the State Legislature; and it is violative  of Article  14  of the Constitution; and thirdly,  whether  the said provision is violative of Article 301 of the  Constitu- tion. It  was  contended on behalf  of the appeallant   that section 13AA of the Act is a charging section and imposes  a charge  of  an  additional rate of 2% in the  rupee  if  the following  conditions laid down therein are  satisfied:  (i) the charge is levied upon a dealer who is liable to pay  tax under the Act; (ii) such a dealer purchases any goods speci- fied in Part I of Schedule C, directly or through commission agent,  from a person who is or is not a registered  dealer; (iii) the goods so purchased are used in the manufacture  of taxable goods; and (iv) the goods which are so  manufactured (and not the goods on which purchase tax had been paid)  are despatched  to the dealer’s own place of business or to  his agent’s place of business situated outside the State. 552     According  to the appellant, the said section lays  down the person who is liable to pay tax, the goods on which  the same  is leviable and the taxable event which would  attract the  liability of additional tax of two paise in the  rupee, namely   the  despatch  or  consignment  of  goods  by   the dealer/manufacturer outside the State.     According  to  Dr. Pal, counsel for the  appellant,  the taxable event is not the purchase of goods as such which  is the  raw-material, but it is the despatch or consignment  of

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goods  manufactured  by the dealer/manufacturer to  its  own branch  outside the state; and that thus manufactured  goods are different from commercial commodity, distinct and  sepa- rate  from the raw materials on which purchase tax  has  al- ready  been  paid.  It is well-settled,  it  was  reiterated before:us, that in case of excise duty, the taxable event is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. In case of sales  tax, taxable  event  is  the sale of goods.  Hence,  though  both excise  duty and sales tax are levied with reference to  the goods, the two are different imposts, in one case the  impo- sition  is on the act of manufacture or production while  in case  of other the imposition is on the act of sale. But  in neither case the impost is a tax directly on the goods.  See in  this connection, the observations of this Court  in  re: The Bill to amend s. 20 of the Sea Customs Act, 1878 and  s. 3  of the Central Excises & Salt Act,  1944,  [1964]  3  SCR 787  at 821 and M/s. Guruswarny & Co. v. State of Mysore,  [ 1967] 1 SCR 548 at 562.     The  power to tax the sale or purchase of goods is  dif- ferent from the right to impose taxes on use or consumption. According to Dr. Pal such power to levy sales tax cannot  be exercised    at   the   earlier   stage   of    import    or manufacture/production  nor the said power can be  exercised at  the  later stage of use or consumption but only  at  the stage  of  sale or purchase. In respect of  sales  tax,  the right  to levy duty would not at all come into being  before the  time  of  sale/purchase. Sales tax  cannot  be  imposed unless  the goods are actually sold and may not be  leviable if  there  is  a transfer in some other form.  See  in  this connection the observations of the Federal Court in  Mukunda Murari  Chakravarti & Ors. v. Pabitramoy Ghosh &  Ors.,  AIR 1945 FC 1 at 22. Therefore, in this case it is necessary  to ascertain  what is the taxable event under section 13-AA  of the  Act which attracts duty. A taxing event is  that  event the occurrence of which immediately attracts the levy or the charge of tax.     In the fiscal legislations normally a charge is created. The  mischief  of taxation occurs on the  happening  of  the taxable event. Diffe- 553 rent  taxes  have different taxable events. In  the  instant case, Dr. Pal canvassed before us that the incidence of  the levy  of additional tax of two paise in the rupee is not  on the  purchase  of goods but such a levy  is  attracted  only when--(a)  the goods which so purchased on payment  of  pur- chase tax are used in the manufacture of taxable goods;  and (b)  the  goods so manufactured are despatched  to  his  own place  of business or to his agent’s place of business  out- side the State. Therefore, the incidence of tax is attracted not  merely on the purchase but only when the goods so  pur- chased arc used in the manufacture of taxable goods and  are despatched outside the State. In our opinion, it was rightly submitted that it is the effect of section 13AA of the  Act. It  was further highlighted by Dr. Pal on behalf...  of  the assessee  that  additional tax is not levied  on  the  goods purchased on payment of purchase tax and despatched  outside the  State.  The  goods which are purchased  on  payment  of purchase  tax are used in the manufacture of taxable  goods. What  is despatched is not the raw material which have  been purchased  on payment of purchase tax but a completely  dif- ferent  commodity,  namely, vanaspati and soap. If  the  raw materials  as such purchased on payment of purchase tax  are despatched  outside  the  State, the  additional  tax  under section 13-AA of the Act is not attracted. Hence, the  inci-

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dence  of additional tax has no nexus with the  purchase  of the  raw-materials, as was contended by Mr.  S.K.  Dholakia, appearing for the State and as held by the High Court.     Purchase  tax  under section 3 of the Act  is  attracted when  the taxable event i.e. the purchase of  goods  occurs, but  the taxable event for the imposition of additional  tax of  two  paise in the rupee occurs only when  the  goods  so purchased  are used in the manufacture of taxable goods  and such  taxable  goods are despatched outside the State  by  a dealer-manufacturer.  Dr. Pal drew our attention to some  of the  observations of this Court in Kedarnath Jute  Mfg.  Co. Ltd.  v. Commissioner of Income-tax (Central), Calcutta,  82 ITR  SC  363 and State of Madhya Pradesh &  Ors.  v.  Shyama Charan Shukla, 29 STC SC 215 at 218-219. On the other  hand, Mr. Dholakia submitted that the submission of the  appellant proceeded on the assumption that the liability to pay is the same as the obligation to pay but this was wrong. These  two are  different. It was submitted that the obligation to  pay is  not the same thing as liability to tax; and that it  was wrong  to proceed on the basis that because  ’obligation  to pay’ is a later event, ’the despatch of goods’ is the  taxa- ble event. This is a fallacy, according to Mr. Dholakia.  In this connection, reliance was placed on the observations  of this  Court in R.C. Jail v. Union of India, [1962] Suppl.  3 SCR 436, where this Court reiterated that subject always  to the legislative com- 554 petence of the enacting authority, the tax can be levied  at a  convenient stage, so long as the character of the  impost is  not lost. The method of collection does not  affect  the essence  of the machinery of collection  for  administrative convenience. Reliance was also placed on the observations of Union  of India v. Bombay Tyre International Ltd., [1984]  1 SCR 347.     It  was submitted by Mr. Dholakia that the  correct  ap- proach is to first determine whether the State  Legislature, having regard to Entry 54 of List II to the 7th Schedule  to the  Constitution,  can levy tax on purchase of a  class  of goods,  which class is to be identified by reference to  the condition of use of such goods into other taxable goods  and despatch of such taxable goods outside the State. He submit- ted  that  if it is accepted that the State could  have  the power to tax purchases of goods meant for use into  manufac- ture of other taxable goods and despatch outside thereafter, then  next  question is whether the  State  enactment  (like section 13AA of the Bombay Act) is so formulated as to  come within the framework described. He admitted that even if  it did,  it would still have to be subject to (a) the  doctrine of  pith and substance, (b) the fundamental rights, and  (c) Article 301.     According  to Mr. Dholakia, the Act contains a  charging section  which  is section 3. It levies tax on  turnover  of sales  and purchases within section 2(36) and 2(35)  respec- tively of the said Act. Section 13 of the Act levies tax  on purchases in accordance with rates prescribed in Schedule  C if  the  goods are purchased from  an  unregistered  dealer. Section  13A levies a concessional tax on purchases  if  the goods  are  purchased from a registered dealer,  provided  a declaration  in the prescribed form is given  under  section 12(b)  of  the Act, if the purchaser buys directly,  or  one under section 12(d) if the purchaser buys through a  commis- sion  agent. In both the forms the relevant conditions  are: (a)  that the goods fall within Part ii of Schedule  C;  and (b)  that the goods bought would be used for manufacture  of other  taxable  goods within the State and sold  within  the

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State.  Mr. Dholakia submitted that on giving the  aforesaid declaration,  the purchaser would have to pay only  4%  tax. The rates prescribed in Schedule C are as under:                    Schedule ’C’     Part             Minimum Rate     Maximum Rate       I                   2%            4%       II                  6%            15% 555     The effect of section 13A without section 13-AA, accord- ing  to Mr. Dholakia, was that only those who  bought  goods which fell into Part II, would have benefitted by the decla- ration,  since  the rate mentioned in section  13A  was  4%. Hence, those buying goods falling within Part I of  Schedule C  had  not to give any declaration under section  12(b)  or 12(d), as the case may be, and still manufacture the taxable goods and despatch them outside the State. According to him, as a result of this situation, two results emerged, i.e. (i) the  State lost revenue because the goods manufactured  with the help of the infrastructure provided by the State escaped further  tax, by goods being resold outside the  State;  and (ii) the purchasers of raw-materials used by the manufactur- ers for producing new taxable goods, were not being  treated equitably because those whose purchases of goods which  fell into Part II had to give a declaration to get the benefit of reduced  rate. On the other hand, those whose  purchases  of goods  fell  in Part I, need not give  such  a  declaration. According  to  him,  from the standpoint of  the  object  of encouraging  resale within the State, the classification  in form of Part I and II had no rational nexus. Therefore, that construction should be made which may make section 13-AA  of the Act, to avoid this mischief.     According  to Mr. Dholakia, section 13AA speaks  of  the requirement  of additional purchase tax from those who  have paid purchase tax, if the object of the purchases is to  use the goods falling in Part I of Schedule C for manufacture of taxable  goods  and the despatch of such goods  outside  the State.  He alleged it to be a fair and reasonable  construc- tion and it will subserve the purpose of the amendment.     It  is well settled that reasonable construction  should be followed and literal construction may be avoided if  that defeats  the  manifest object and purpose of  the  Act.  See Commissioner  of Wealth-tax, Bihar & Orissa v.  Kripashankar Dayashankar Worah, 81 ITR 763 at 768 and Income-tax  Commis- sioners for city of London v. Gibbs, 10 ITR Suppl. 121 HL at 132.  Mr. Dholakia further submitted that the  Statement  of Objects  &  Reasons  also helps this  construction.  In  our opinion, he rightly submitted that because the accounts  had to be maintained in  a particular manner, is no criterion or evidence for determining when the liability arises. The  law is that the liability to tax would be determined with refer- ence to the interpretation of the Statute which creates  it. It cannot be determined by referring to another Statute.  As contended  by  both the sides, it is well-settled  that  the doctrine  of pith and substance means that if  an  enactment substantially falls within the powers expressly conferred by the Constitution upon the Legislature 556 which  enacted  it, it cannot be held to be  invalid  merely because  it incidentally encroches upon matters assigned  to another  Legislature. See Kerala State Electricity Board  v. Indian  Aluminium  Co, [1976]  SCR 552  and  Prafulla  Kumar Mukherjee & Ors. v. Bank of Commerce Ltd., AIR 1947 PC 60 at 65.     Therefore, the proper question which one should  address to  oneself  is, whether section 13AA is in  pith  and  sub-

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stance,  not levying tax on purchase but one levying tax  on consignment. Depending upon the answer to the question,  the validity of the action can be judged. Mr. Dholakia submitted that the Act is in pith and substance, an Act levying tax on purchase  and  not one levying tax on consignment,  and  re- ferred to the observations of this Court in State of  Karna- taka  v. Shri Ranganatha Reddy, [1978] 1 SCR 641.  According to  him,  the consignment contemplated in section  13-AA  is only  of manufactured goods and no tax is levied under  sec- tion  13AA in respect of such manufactured goods. He  empha- sised as aforesaid. It is well-settled that while  determin- ing  nature of a tax, though the standard or the measure  on which the tax is levied may be a relevant consideration,  it is not the conclusive consideration. One must have regard to such other matters as decided by the Privy Council in Gover- nor General in Council v. Province of Madras, (supra) not by the  name of tax but to its real nature, its pith  and  sub- stance which must determine into what category it fails. See the  observations of R.R. Engineering Co. v.  Zila  Parishad Bareilly  & Anr., [1980] 3 SCR 1; in re: A  reference  under the  Govt.  of Ireland Act, 1920, [1936] AC 352 at  358  and Navnitlal  C. Javeri v. K.K. Sen, Appellate  Asstt.  Commis- sioner of Income Tax, ’D’ Range, Bombay, [1965] 1 SCR 909 at 915.     On  an  analysis we find that the goods which  are  des- patched  are different products from the goods on  the  pur- chase of which purchase tax was paid. The Maharashtra legis- lation has to be viewed in the context of 46th Amendment  to the Constitution. The 46th 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 consign- ment  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 7th Schedule. The said Amendment was made on the consideration of the 61st Report of the Law Commission. Entry 92B in List I of the 7th 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 557 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 in List I is to be given the  widest interpretation, as it should be, it would be clear that  the constitutional  changes introduced by the 46th Amendment  in Article  269 read with the Entry, the tax on consignment  of goods  now comes within the exclusive legislative  field  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

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that  is so, then it is a duty on despatch. In that view  of the matter, this charge cannot be sustained.     As  mentioned hereinbefore, the section has  been  chal- lenged as being violative of Article 14 of the Constitution. This  attack is based on the discrimination between the  two types of taxes but in the way we have construed the section, in  our  opinion,  this question does not  survive.  It  was further submitted by Dr. Pal that section 13AA of the Act is violative  of  Article 301 of the Constitution. It  makes  a discrimination between the dealer/manufacturer who despatch- es the goods outside the State and the other dealer/manufac- turer. Both the dealer/ manufacturers purchase the goods  on payment  of purchase tax and use them in the manufacture  of taxable  goods. The incidence of additional tax on the  pur- chase  of  goods is attracted only  when  such  manufactured goods are despatched outside the State. If a dealer/manufac- turer has to despatch the goods outside the State, he has to pay  a  higher rate of tax and thus he is  discriminated  as compared to the other dealer/manufacturer who purchases  the raw  material on payment of 4% purchase tax, but  despatches the  raw  material straightaway outside the State  and  uses them  in  the manufacturer of goods outside the  State.  The High  Court held that there was no violation of Article  301 of  the Constitution. Reference was made to the decision  of this Court in Atiabari Tea Co. Ltd. v. The State of Assam  & Ors., [1961] 1 SCR 809; 558 The  Automobile Transport (Rajasthan) Ltd. v. The  State  of Rajasthan, [1963] 1 SCR 491; Andhra Sugars Ltd. v. State  of Andhra  Pradesh, (supra), State of Madras v.  N.K.  Nataraja Mudaliar, [1968] 3 SCR 829 and State of Kerala v. A.B. Abdul Khadir & Ors., [1970] 1 SCR 700.     One has to determine: does the impugned provision amount to  restriction  directly and immediately, on the  trade  or commerce movement? As was observed by this Court in  Kalyani Stores  v.  The State of Orissa & Ors., [1966]  1  SCR  865, imposition  of a duty or tax in every case would not  tanta- mount  per  se  to any infringement of Article  301  of  the Constitution.  Only such restrictions or  impediments  which directly or immediately impede free flow of trade,  commerce and  intercourse  fall  within the  prohibition  imposed  by Article 301. A tax in certain cases may directly and immedi- ately restrict or hamper the flow of trade, but every  impo- sition  of tax does not do so. Every case must be judged  on its own facts and its own setting of time and circumstances. Unless the court first comes to the finding on the available material  whether  or not there is an  infringement  of  the guarantee  under  Article  301 the further  question  as  to whether  the Statute is saved under Article 304(b) does  not arise.  The goods taxed do not leave the State in the  shape of raw material, which change their form in the State itself and  there is no question of any direct, immediate  or  sub- stantial hindrance to a free flow of trade. On the  evidence adduced,  we are in agreement with the High Court  that  the challenge to the imposition in the background of Article 301 cannot be sustained and, therefore, no question whether such imposition is saved under Article 304(b) of the Constitution arises.     In the aforesaid view of the matter and for the  reasons mentioned  hereinbefore, it must be held that so far as  the appeals  in  respect of the Haryana Act are  concerned,  the High  Court was right in the view it took in Goodyear  India Ltd’s case, 53 STC 163 as well as the views expressed by the High  Court  in Bata India Ltd. v. The State  of  Haryana  & Anr., 54 STC 226 are correct and are affirmed. The views  of

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the  High Court expressed in Des Raj Pushap  Kumar  Gulati’s case (supra) are incorrect for the reasons mentioned herein- before.  The  last mentioned judgment and the  judgment  and orders  following passed by the Punjab & Haryana High  Court are,  therefore, set aside. In the premises,  Civil  Appeals Nos.  1166--72/85 (M/s Goodyear India Ltd. v. State of  Har- yana  & Anr.), Civil Appeal No. 1173-77 (NT)/85 (Gedore  (I) Pvt.  Ltd.  v. State of Haryana & Anr.),  civil  appeal  No. 2674/86  (M/s. Kelvinator of India Ltd. & Anr. v.  State  of Haryana  &  Ors.), Civil Appeal No. 1633 (NT)/85  F.C.I.  v. State of Haryana & Anr.) and 559 Civil Appeal No. 3033 (NT)/86 F.C.I., Karnal v. The State of Haryana  & Ors.) are allowed and the judgment and  order  of the High Court are set aside.     Civil  Appeals  Nos. 15 12 (NT)/84 [State of  Haryana  & Anr. v. Gedore Tools (P) Ltd.] and 1515/84 [State of Haryana & Anr. v. Goodyear India Ltd. ] are dismissed. Special leave petitions  Nos. 83988402/83 are dismissed, and for the  rea- sons mentioned hereinbefore, civil appeal Nos. 4162/88 (M/s. Wipro  Products  Ltd.  v. State of Maharashtra  &  Anr.  and 4163/88 [Hindustan Lever Ltd. & Anr. v. State of Maharashtra & Anr. ] are allowed and the judgment and order of the  High Court passed therein, are hereby set aside.     In  the facts and the, circumstances of this  case,  the parties  will pay and bear the respective costs. So  far  as the  civil appeals Nos. 1633/85 and 3033/86  are  concerned, wherein the appellants are the Food Corpn. of India, I allow these  appeals  and setting aside the judgment of  the  High Court on the ground that tax on despatch or consignment  was not  within the competence of the State Legislature.  I  am, however,  not dealing with or expressing any opinion on  the other  contentions of the F.C.I. that in view of the  nature of  its business it was not liable to tax in respect of  the sales tax. This contention will be decided in the  appropri- ate proceedings.     So  far  as the contention regarding penalty  under  the Haryana  Act,  these proceedings fail because  the  charging provisions  fail. In so far as the penalty  proceedings  are impugned  on  other grounds apart from the  failure  of  the charging  provisions,  I am expressing no opinion  on  these aspects. RANGANATHAN, J. I agree but wish to add a few words.     The  question raised in these appeals is a fairly  tick- lish  one. Simply stated, Section 9 of the  Haryana  General Sales  Tax Act, 1973 as well as section 13AA of  the  Bombay Sales  Tax Act, 1959, purport only to levy a  purchase  tax. The  tax, however, becomes exigible not on the  occasion  or event  of purchase but only later. It materialises  only  if the purchaser (a) utilises the goods purchased in the  manu- facture  of  taxable goods and (b) despatches the  goods  so manufactured  (otherwise than by way of sale) to a place  of business situated outside the State. The legislation, howev- er, is careful to impose the tax only on the price at  which the raw materials are purchased and not on the 560 value of the manufactured goods consigned outside the State. The States describe the tax as one levied on the purchase of a  class  of  goods viz. those purchased in  the  State  and utilised  as raw material in the manufacture of goods  which are  consigned  outside the State otherwise than by  way  of sale. On the other hand, according to the  respondentsasses- sees,  this  is nothing but a tax on  consignment  of  goods manufactured  in  the  State to places  outside  the  State, camouflaged  as a purchase tax, by quantifying the  levy  of

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the  tax with reference to the purchase price of  the  goods purchased  in the State and utilised in the manufacture.  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.  1,  therefore, had considerable  doubts  not  only during  the  arguments but even some time 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 State 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. & Anr. v. State, [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  expres- sion  often used in this 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 S.T.C. 191, though rendered in  the context of an analogous provision, does not touch the  issue in the present case.     The  above distinction becomes significant  particularly in the background of the constitutional amendments  referred to  in  the judgment of my learned brother.  These  indicate that  there were efforts at sales tax avoidance  by  sending goods manufactured in a State out of raw materials purchased inside to other States by way of consignments rather than by way  of sales attracting tax. This situation lends force  to the  contention of the assessees that the States, unable  to tax  the exodus directly, attempted to do so  indirectly  by linking the levy ostensibly to the "purchases" in the State. 561     Viewing  the  impugned  statutory  provisions  from  the perspectives indicated above, I agree with my learned broth- er that the appeals have to be allowed as held by him. T.N.A.                   Appeals and petitions disposed of. 562