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PETITIONER: KASTURI LAL HARLAL

       Vs.

RESPONDENT: STATE OF U.P. & ORS.

DATE OF JUDGMENT29/10/1986

BENCH: BHAGWATI, P.N. (CJ) BENCH: BHAGWATI, P.N. (CJ) MISRA RANGNATH KHALID, V. (J) OZA, G.L. (J) DUTT, M.M. (J)

CITATION:  1987 AIR   27            1987 SCR  (1)  86  1986 SCC  (4) 704        JT 1986   749  1986 SCALE  (2)708

ACT:     U.P.  Sales Tax Act, 1948: s.29-A--Provision for  refund to  buyers  of amount realised as tax by  a  dealer--Whether constitutionally valid.

HEADNOTE:     Section 29-A of the U.P. Sales Tax Act, 1948 inserted by s.  I7 of the U.P. Taxation Laws (Amendment) Act, 1969  pro- vided for refund of the amount, realised by a dealer as  tax on sale of goods and deposited under sub-s.(4) or  sub-s.(5) of s.8-A of the Act, to the person from whom such dealer had actually realised the same, and to no other     Coal became a taxable commodity under the U.P. Sales Tax Act for the first time on 1st October 1965. The  appellants, who were registered as dealers in coal under the Act, on the assumption  that  sales tax was payable by them on  sale  of coal  from and after 1st October 1965, corrected amounts  by way  of  sales tax from the purchasers and  submitted  their returns  for the assessment year 1965-66 after depositing  a sum  representing the amount of tax payable by them  in  ac- cordance with their returns. The Sales Tax Officer, however, found  that  no sales tax was payable by the  appellants  on sale of coal under the Act. The appellants thereupon claimed refund  of  the amount deposited but the Sales  Tax  Officer rejected their claim under s.29-A of the Act.     A  Writ  Petition challenging the  correctness  of  that order and the constitutional vires of s.29-A was rejected by the High Court. Dismissing the appeal by certificate, the Court,     HELD:  Section  29-A  of the U.P. Sales  Tax  Act,  1948 introduced  by s. I7 of the U.P. Taxation  Laws  (Amendment) Act,  1969  fails within the legislative competence  of  the State Legislature and is constitutionally valid. [9OF, 89F]     Clause  (3)  of Art.246 of the  Constitution  read  with Entry 54 in List H of the Seventh Schedule thereto  empowers the State Legislature 87 to  make laws with respect to taxes on the sale or  purchase

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of goods. An Entry in a Legislative List must be read in its widest  amplitude and the legislature must be held  to  have power  not  only to legislate with respect  to  the  subject matter of the entry but also to make ancillary or incidental provision  in aid of the main topic of  legislation-  Taking over  of  sums collected by dealers from  the  public  under guise  of  tax solely with a view to returning them  to  the buyers  so deprived is necessarily incidental to tax on  the sale and purchase of goods. The enactment of s.29-A can thus he  said  to  be justified as exercise of  an  ancillary  or incidental  power of legislation under Entry 54. [89G,  90D, 89H] R.S. Joshi v; A}it Mills, [1978] 1 SCR 338, followed.     Ashoka Marketing Ltd. v. State of Bihar & Anr., [1970] 3 SCR 455, dissented from. R. Abdul Qader & Co. v. Sales Tax Officer, Hyderabad, [1964] 6  SCR  867, Orient Paper Mills Ltd., v. State of  Orissa  & Ors., [1962] 1 SCR 549 and State of Orissa v. Orissa  Cement Ltd. & Ors., [1985] Suppl. SCC 608, referred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1862 (NT) of 1971.     From  the Judgment & Order dated 13.7.1970 of  the  High Court  of  Allahabad at Lucknow Bench in Writ  Petition  No. 849/70. Ms. Lira Goswami and D.N. Mishra for the Appellants.     A.D. Singh, Mrs. Ashok K. Gupta, Raj Singh Rana, Mrs. S. Dikshit and B .P. Maheshwari for the Respondents. The Judgment of the Court was delivered by      BHAGWATI, CJ. This appeal by certificate raises a short question  as to the constitutional validity of section  29-A of  the  U.P. Sales Tax Act, 1948. This section,  which  was introduced in the U.P. Sales Tax Act, 1948 by section 17  of the U.P. Taxation Laws (Amendment) Act, 1969, has been  held to  be  constitutionally valid by a Division  Bench  of  the Allahabad  High  Court  on 13th July  1970.  The  appellants question  the  correctness of this view taken  by  the  High Court. The appellants carry on business as dealers in coal and they are 88 registered as such under the U.P. Sales Tax Act, 1948. Prior to  1st October 1965, there was no sales tax levied on  sale of  coal  and for the first time on 1st October  1965,  coal became  a  taxable commodity under the U.P. Sales  Tax  Act, 1948.  The appellants, proceeding on the footing that  sales tax  was payable by them on sale of coal from and after  1st October 1965, collected amounts-by way of sales tax from the purchasers  and submitted their returns for  the  assessment year 1965-66 after depositing a sum of Rs. 10,073.86  repre- senting the amount of tax payable by them in accordance with their  returns.  It was, however, found as a result  of  the assessment order made by the Sales Tax Officer on 28th March 1970  that  no sales tax was payable by  the  appellants  on sales of coal under the U.P. Sales Tax Act, 1948. The appel- lants  thereupon claimed refund of the sum of Rs.  10,073.86 but  the  Sales Tax Officer rejected the claim made  by  the appellants on the ground that by reason of section 29-A,  no refund was claimable by the appellants and the only  persons entitled to claim refund were those from whom the appellants had  collected  the tax. This order made by  the  Sales  Tax Officer  was challenged by the appellants by filing  a  writ

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petition  in the High Court of Allahabad and  the  principal ground on which the correctness of this order was challenged was  that section 29-A was ultra vires as being outside  the legislative  competence of the State Legislature.  The  High Court negatived this challenge and upheld the constitutional validity  of  section 29-A and on this view,  sustained  the order  made by the Sales Tax Officer. The appellants  there- upon  preferred the present appeal after obtaining  certifi- cate of fitness from the High Court.     It  is necessary at this stage to set out  the  relevant provisions of the U.P. Sales Tax Act, 1948 as they stood  at the  material time. Subsection (4) of section 8-A  made  the following provision:                   "(4)  Without prejudice to the  provisions               of  clause (f) of section 14, the amount  rea-               lised  by  any person as tax on  sale  of  any               goods,  shall, notwithstanding  anything  con-               tained in any other provision of this Act,  be               deposited  by  him in  a  Government  treasury               within  such period as may be  prescribed,  if               the  amount  so realised  exceeds  the  amount               payable  as tax in respect of that sale or  if               no tax is payable in respect thereof." Sub-section  (5) was added in section 8-A by section  11  of the U.P. Taxation Laws (Amendment) Act, 1965 and it read  as follows: 89               "(5) Where a dealer is found not liable to  be               assessed  to  tax by reason  of  his  turnover               being  less  than the amount specified  in  or               under section 3, or sub-section (1) or (2)  of               section  18, but has realised any tax as  such               in  respect of such turnover, he  shall,  not-               withstanding  anything contained in this  Act,               be liable to pay the same to the State Govern-               ment  and shall deposit it into  the  treasury               within  30  days of the date of the  order  by               which  he was found not so liable,  unless  it               has already been so deposited." Since,  having regard to the judgment of this Court,  in  R. Abdul Qader & Co. v. Sales Tax Officer, Hyderabad, [1964]  6 SCR 867 it was doubtful whether sub-sections (4) and (5)  of section  8-A, standing by themselves, would fail within  the legislative  competence  of the State  Legislature.  Section 29-A was inserted in the U.P. Sales Tax Act, 1948 by section 17 of the Taxation Laws (Amendment) Act 1969:               Refund  in  Special  Cases--   Notwithstanding               anything contained in this Act or in any other               law  for  the time being in force  or  in  any               judgment, decree or order of any court,  where               any amount is either deposited or paid by  any               dealer  or other person under sub-section  (4)               or sub-section (5) of section 8 A, such amount               or  any  part thereof shall on a  claim  being               made  in that behalf in such form  and  within               such period as may be prescribed, be  refunded               to  the  person from whom such dealer  or  the               person  had actually realised such  amount  or               part, and to no other person." The  question  is whether this section, as it stood  at  the material  time  in the form in which it  was  introduced  by section 17 of the U.P. Taxation Laws (Amendment) Act,  1969, was within the legislative competence of the State  Legisla- ture.     The only entry under which section 29-A was sought to be

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brought  was Entry 54 in List II of the Seventh Schedule  to the  Constitution. Clause (3) of Article 246 read with  this entry  empowers  the  State Legislature to  make  laws  with respect to taxes on the sale or purchase of goods. It is now well  settled  that an entry in a Legislative List  must  be read  in  its widest amplitude and the legislature  must  be held to have power not only to legislate with respect to the subject  matter of the entry but also to make  ancillary  or incidental  provision in aid of the main topic  of  legisla- tion. Can section 29-A be justified as exercise of an ancil- lary or incidental power of legislation under Entry 547 Now, 90 this question is no longer res integra. It stands  concluded by  the decision of this Court in R.S. Joshi v. Ajit  Mills, [1978]  1 SCR 338. It is no doubt true that the decision  of this  Court  in Ashoka Marketing Ltd. v. State  of  Bihar  & Anr.,  [1970] 3 SCR 455 does seem to indicate that a  provi- sion such as s. 29-A would not be justifiable as an exercise of  incidental or ancillary power. There also, the  impugned legislative  provision,  namely, section 20-A of  the  Bihar Sales  Tax  Act was very similar to section  29-A  and  this Court  held that it fell outside the legislative  competence of  the  State Legislature. The Court  in  Ashoka  Marketing Ltd,’s  case (supra) did not follow the decision  in  Orient Paper Mills Ltd. v. State of Orissa & Ors., [1962] 1 SCR 549 where  a similar provision was attacked on the  same  ground but the attack was repelled by the Court. If the decision in Ashoka Marketing Ltd. ’s case (supra) were to be regarded as good  law,  lsection 29-A would have to be  struck  down  as being outside the legislative competence of the State Legis- lature. But this Court in R.S. Joshi’s case (supra)  clearly and  categorically  disapproved of the  decision  in  Ashoka Marketing  Company’s case and reaffirmed the view  taken  in Orient  Paper Mill’s case (supra). The Court held  that  the taking  over  of sums collected by dealers from  the  public under guise of tax solely with a view to return them to  the buyers so deprived is necessarily incidental to ’tax on  the sale and purchase of goods’. Such a provision is  manifestly a  consumer  protection measure since "while  suits  against dealers to recover paltry sums by a large number of  custom- ers  would lead to endless and expensive litigation, a  sim- pler  process of returning those sums on application by  the relevant  purchasers  would protect the common  buyer  while depriving the dealers of their unjust-gains." This Court  in a  subsequent decision in State of Orissa v.  Orissa  Cement Ltd.  &  Ors., [1985] Suppl. S.C.C. 608 also took  the  same view  and pointed out that the decision in Ashoka  Marketing Ltd.  ’s  case (supra) was expressly dissented from  by  the decision in R.S. Joshi’s case (supra). The decision in  R.S. Joshi’s case (supra) must, therefore, be regarded as laying- down the correct law on the subject and if that be so. it is obvious  that section 29-A must be held to fall  within  the legislative  competence  of the State  Legislature  and  its constitutional validity must be upheld.     The  appeal must, therefore, be dismissed. but since  it was  filed at a time when the position in law  was  nebulous and  had  not been finally settled by the decision  in  R.S. Joshi’s case (supra) we would direct that there shall be  no order as to costs. P.S.S.                                                Appeal dismissed. 91