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PETITIONER: THE INDORE IRON AND STEEL REGISTEREDSTOCK-HOLDERS’ ASSOCIATI

       Vs.

RESPONDENT: THE STATE OF MADHYA PRADESHAND OTHERS

DATE OF JUDGMENT: 26/07/1961

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SUBBARAO, K. HIDAYATULLAH, M. SHAH, J.C. DAYAL, RAGHUBAR

CITATION:  1962 AIR  191            1962 SCR  (2) 924  CITATOR INFO :  R          1968 SC 331  (14)

ACT: Sales  Tax-Commodity  declared  essential for  the  life  of community-Imposition of tax by State Government under  prior enactment-Constitutional  validity-Constitation  of   India, Art. 286 (3)-Essential Goods (Declaration and Regulation  of Tax  on Sale or Purchase) Act, 1952, ss. 2, 3 Madhya  Bharat Sales Tax Act, Samvat 2007, s. 5(2).

HEADNOTE: The  constituent members of the appellant  Association,  who carried on business in iron and steel articles were assessed to  sales  tax  for the years 1953-54 and  1954-55  under  a notification dated October 24, 1953, issued by the State  of Madhya  Bharat under s. 5(2) of the Madhya Bharat Sales  Tax Act, Samvat 2007, (Act No. 30 of 1950).  The appellant moved the   High  Court  under  Art.  226  of   the   Constitution challenging  the  validity of the assessment on  the  ground that the said articles were covered by the declaration  made by  Parliament by s. 2 of the Essential  Goods  (Declaration and  Regulation of Tax on Sale or Purchase) Act, 1952,  that iron and steel were essential commodities within the meaning of Art. 286(3) of the Constitution which was operative  from August 9, 1952.  The High Court found against the appellant. Held, that even assuming that the words "iron and steel"  in Entry  14  of  the Schedule to the  Act  were  comprehensive enough  to  include articles made of iron  and  steel,  that would not necessarily render the notification invalid  under Art. 286(3) of the Constitution. Article  286(3), as it stood before the Constitution  (Sixth Amendment) Act, 1956, could be successfully invoked only  if three  conditions  were  satisfied, (1)  that  the  impugned legisla.  tion  was  one  by the  Legislature  of  a  State, constituted   under  the  Constitution,  (2)  that  it   was subsequent  to the declaration made by the Parliament as  to the  essential  character of the commodity and (3)  that  it could  be,  but  was  not,  reserved  for  the   President’s consideration and assent.

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It was obvious, therefore, that a subsequent Parliamentary 925 declaration could not affect the validity of an enactment retrospectively. Sardar Soma Singh v. The State of Pepsu and Union of  India, (1954)  S. C. R. 955 and Firm of A. ’Gowrishankar  v.  Sales Tax Officer, Secunderabad, A. I. R. 1958 S. C. 883, referred to. Although the Art, tinder which the impugned notification was made, satisfied the first condition, it did not satisfy  the second  or the third and, consequently, its  validity  could not be questioned under Art. 286(3) of the Constitution. Held,  further,  that  it  was apparent from  s.  3  of  the Essential  Goods (Declaration and Regulation of Tax on  Sale or Purchase) Act, 1952, that if a law had been passed  prior to the commencement of the Act authorising the imposition of a  tax- its validity could not be challenged on  the  ground that the said commodity was subsequently declared by the Act to be essential for the life of the community.  The impugned notification and the State Act under which it was made were, therefore, outside the purview of s. 3 of the Act.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 509 and 510 of 1960. Appeals  by special leave from the judgment and order  dated October  26,  1956, of the former Madhya Bharat  High  Court Indore. in Civil Misc.  Cases Nos. 26 of 54 and 48 of 55. A.   V. Viswanatha Sastri, C. B. Agarwala and A.  G.   Ratna parkhi, for the appellants. R.J. Bhave and 1. N. Shroff, for the respon. dents. 1961.  July 26.  The Judgment of the Court was delivered by GAJENDRAGADKAR, J.,The appellant, the Indore Iron and  Steel Registered  Stock-holders’ Association (Private) Ltd., is  a ’registered  Association whose constituent members carry  on business generally in fabricated iron and steel material and more particularly in iron sheets, plain or corrugated, bars, rods, light and heavy structurals, nails, joints, wire nails and all kinds and varieties of wirer, and 926 pipes.   This  business  is carried on  by  the  constituent members  of  the  appellant at Indore and  Ratlam  at  which places  they  have their registered offices.  The  State  of Madhya Bharat, by its Act No. 30 of 1950, imposed sales  tax in  the  territory of Madhya Bharat on the  sales  of  goods therein  specified with effect from May 1, 1950,  and  under the  provisions  of the said Act the Commissioner  of  Sales Tax, Madhya Bharat, and the, Sales Tax Officer, Indore,  who are respondents 2 and 3, were appointed authorities for  the assessment  of  tax  leviable  under the  Act  and  for  its recovery in their respective areas. Section 3 of the Act is the charging section and it provides for  the incidence of taxation, Section 4, which deals  with the application of the Act exemption and exclusion, provides by Sub-s. (2) that no tax shall be payable under the Act  on the sale of goods specified in the second column of Sch.   1 on conditions mentioned in column 3 of the Schedule.  "’Iron and  steel"  appears  in,  Sch.  1 as  item  39.  Section  5 prescribes the rate of tax and it provides that the tax will be  recoverable  as  notified  from  time  to  time  by  the Government by publication in the official gazette subject to the  condition that it shall not be less than Rs. 1-9-0  per cent or more than 61 per cent.  Section 4(3) authorises  the

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Government  by notification to modify Sch.  1 from  time  to time.   Similarly  s. 5(2) authorises the  Government  while notifying  the tax payable by a dealer to notify  the  goods and the point of their sale at which the tax is payable.  It is  by  virtue of this delegated power that  the  State  ’Of Madhya Bharat, respondent 1 purported to issue notifications to which we will presently refer. On  May  22, 1950. a notification was issued under  s.  5(2) specifying  serially the articles taxed, ’the stage of  sale by  traders in Madhya Bharat on which the tax is levied  and the  rate of sales tax per cent.. Item 27 in the list  dealt with goods manu-                     927 factured from things (wastu) except gold and silver or goods manufactured  from more than one metal (except  circles  and sheets  of copper, brass and aluminium).  The  notifications provided  that  the tax had to be paid by  the  producer  or importer at that rate of Rs. 3-2-0 per cent. Meanwhile  Art.   286(3) of the Constitution had  come  into force.   This Article as it then stood provided that no  law made by the Legislature of a State imposing, or  authorising the imposition of, a tax on the sale or purchase of any such goods  as  have  been declared by Parliament by  law  to  be essential  for the life of the community, shall have  effect unless  it  has been reserved for the consideration  of  the President and has received his assent. Thereafter   Parliament  by  law  proceeded  to   make   the declaration  as contemplated by this Article by s. 2 of  Act 52  of 1952 [Essential Goods (Declaration and Regulation  of Tax  on  sale or purchase) Act] (hereafter called  the  Act) which  was passed on August 9, 1952.  Section 2 of  the  Act provides that the goods specified in the Schedule are hereby declared  to  be essential for the life  of  the  community. Item  14 in the Schedule refers to ,iron and steel’.   Thus, as  a result of these provisions in on and steel came to  be declared  as essential for the life of the community  within the meaning of Art. 286(3) as from August 9, 1952. Respondent  1  thereupon  purported to give  effect  to  the provisions of Art. 286(3) and s. 2 of the Act by issuing two notifications   on   October  24,  1953.    By   the   first notification  it was provided that no tax shall  be  payable enter alia on the sale of iron and steel.  ’Iron and  steel’ was  placed  at  item 39 in the said  Schedule.   The  other notification  issued on the same day by item 9 in  the  list provided for the sale of the articles specified in the  said item.  This item reads thus: 928       Every  kind of metal including  copper  brass,       manganese,   zinc,  lead,   mercury,   bronze,       nickel, aluminium, tin and their ore form (ex-       cluding  iron,  steel, gold  and  silver)  and       goods  prepared any metal other than gold  and       silver,  utensils  and wires,  goods  prepared       from one ore more than one metal, utensils and       wires  which  also  includes  mangars,   metal       pieces  and scraps, cutting and lantern,  gas,       stove and type letters (excluding circles  and       sheets of copper, bra,% and aluminium)." It  is  common-ground  that  under  this  notification   the articles  in  which the constituents of the  appellant  deal would be liable to pay the sales. tax in question. After  this notification was issued the appellant  wrote  to respondent  3 claiming exemption from payment of  sales  tax for the goods and articles in which its constituent  members are  dealing  but  this  plea  was  rejected  by  the   said

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respondent,  and  the constituent members of  the  appellant were  called upon to pay sales tax each in respect of  their individual turnover.  It was under these circumstances  that the appellant filed two writ petitions under Art. 226 of the Constitution in the High Court of Madhva Bharat at Indore in which  it challenged the validity of the  assessment  orders passed  for the two years 1953-54 and  1954-55  respectively (Petitions Nos. 26 of 1954 and 48 of 1955). The  appellant’s  case was that the articles  in  which  the constituent  members of the appellant dealt were covered  by the  parliamentary declaration contained in s. 2 of the  Act and  as such were no longer liable to pay sales  tax.   This plea was resisted by the respondents.  It was urged on their behalf  that  the  notification issued by  respondent  1  on October 24, 1953 was valid, and item 27 in the list notified brought the articles in question within the mischief of  the Sales  Tax Act and so the petitioners were not  entitled  to any writ as claimed by them.  The High Court has upheld  the plea                     929 raised by the respondents, rejected the contentions urged by the appellant and has dismissed the’ writ petitions filed by it.   It is against these orders of dismissal passed by  the High Court in the two writ petitions filed by the  appellant that the present appeals, No. 509 and 510 of 1960, have been brought  to  this  Court by special leave  granted  by  this Court. Two  points  have  been urged before us  by  Mr.  Viswanatha Sastri,  on  behalf of the appellant, in  support  of  these appeals.   It is urged that s. 2 of the Act  which  contains the parliamentary declaration as contemplated by Art. 286(3) covers  iron  and steel as understood  in  their  commercial sense.  The words "iron and steel" should not be interpreted in  their narrow dictionary meaning.  They do not mean  iron and  steel  as they come out after smelting  but  they  mean articles  exclusively made from iron and steel in which  the identity  of  iron and steel has not been  lost.   In  other words, iron and steel in the context mean all articles  made exclusively  of  iron  and steel in  which  steel  merchants normally and generally trade.  It is further argued that  in construing the words "’iron and steel" we must bear in  mind the fact that the object, of Art. 286(3) is to safeguard the ’interest  of the consumer in regard to the  articles  which Parliament  may declare to be essential for the life of  the community, and it is suggested that if the narrow dictionary meaning of the words is adopted it would not serve the  said object and purpose of the constitutional provision. Mr.  Sastri has also relied on what he has described as  the legislative  history  which indicates that  the  said  words should receive a broad and wide construction in the context. In  that  connection  he has invited our  attention  to  the provisions  of’ s. 2(d), s. 3. and the categories  specified in the Second Schedule to the Iron and Steel 930 (Control  of  Production  and  Distribution)  Order,  1941., These  categories,  according  to  Mr.  Sastri  unmistakably support  his argument that the expression ",iron and  steel" as  used in the order was obviously used in a very wide  and broad  sense.  Similarly, he has referred to the  provisions of s. 2(a)(vii) of Act XXIV of 1946 [The Essential  Supplies (Temporary  Powers) Act, 1946] and s. 2(a)(vi) of Act 10  of 1955 (The Essential Commodities Act, 1955).  His  contention is that it would be legitimate for the Court to consider the legislative history in the matter of the use of these  words and  their denotation, and that the legislative  history  to

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which  he has referred supports his argument that the  words ’,iron   and   steel"   should  receive   a   very   liberal interpretation  in determining the effect of the  provisions of  s.  2 of the Act.  The High Court Was not  impressed  by this argument.  It has held that the words "iron and  steel" as  used  in Entry 14 to Sch.  1 of the Act do  not  include within  their ambit articles made of iron and steel such  as those   with   which  we  are  concerned  in   the   present proceedings.  Mr. Sastri seriously questions the correctness of this conclusion. It  is  clear that even if we were to  accept  Mr.  Sastri’s contention  in regard to the denotation of the words  ",iron and steel" as used by the relevant provisions of the Act  it would  still  have  to be shown by the  appellant  that  the impugned notification is invalid because it contravenes  the provisions  of  Art. 286(3).  In other words,  in  order  to succeed  in the present appeals the appellant has  to  prove two  facts, (1) that the words ""iron and steel" in  respect of  which the requisite parliamentary declaration  has  been made by s. 2 of the Act include commodities like those  with which   we  are  concerned,  and  (2)  that   the   impugned notification contravenes Art. 286(3).  It would thus be seen that unless the appellant succeeds in both these contentions the appeals are bound to fail.  Since 931 we  have reached the conclusion that even on the  assumption that  the  parliamentary declaration made  by  the  relevant provision of the Act includes commodities with which we  are concerned  is correct it does not follow that  the  impugned notification  contravened Art. 286(3) we do not  propose  to deal with the first point raised by Mr. Sastri.  In  dealing with  these appeals we would assume in hip, favour that  the words  "iron  and steel" should receive the broad  and  wide interpretation for which he contends. Assuming then that the articles in which the constituents of the   appellant  deal  are  covered  by  the   parliamentary declaration made by the Act does it follow that the impugned notification contravenes Art. 286(3) ? That takes us to  the provisions of Art. 286(3) which we have already cited.  This provision   can  be  successfully  invoked  only  if   three conditions  are satisfied.  The first condition is that  the impugned law must be one which is made by the Legislature of a  State  which  obviously means a  State  which  came  into existence under and after the Constitution ; and that  shows that the impugned law must be a law made by the  Legislature of  a State subsequent to the Constitution.  This  condition is  satisfied  in  the present  case  because  the  impugned notification  has  been issued by virtue  of  the  authority delegated to respondent 1 by Act 30 of 1950 and this Act was passed after the Constitution was adopted. Let  us then consider the second condition which is also  in the  nature  of  a  condition  precedent.   This   condition requires that the impugned law must impose or authorise  the imposition  of  a tax on the sale or purchase  of  any  such goods  as  have  been declared by Parliament by  law  to  be essential  for  the  life of the community.   There  can  be little doubt that this condition postulates that at the time when the impugned law is passed there is a                    [1962] preexisting declaration made by Parliament in regard to  the essential  character of a commodity.  The material words  in respect  of this condition are that    the sale  or purchase of any such goods as have been declared by Parliament by law to  be essential for the life of the community.   Therefore, if  the  parliamentary  declaration  follows  the   impugned

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enactment  it cannot retrospectively affect the validity  of the said enactment.  Article 286(3) contemplates that if  in the face of an existing parliamentary declaration about  the essential  character  of a commodity the  Legislature  of  a State  purports to impose or authorise the imposition  of  a tax on such commodity the enactment would be invalid  unless the  law made by the Legislature has been reserved  for  the consideration of the President and has received his assent. The  third condition emphasises that the impugned  law  must have  been  passed subsequent to the  Constitution,  because unless  the relevant provision of the Constitution  for  the reservation  of  the  law  for  the  consideration  of   the President  has come into force this condition cannot  apply. This  requirement  obviously means that the  office  of  the President  must  have  come  into  existence  and  so   this condition  can become operative only after the  Constitution has  come  into  force.   Therefore,  the  third   condition supports the conclusion which arises from the words used  in the first condition itself. Thus the position is that Act 30 of 1950 satisfies the first condition  but  not  the second.  It is  conceded  that  the relevant provisions of the M. B. Act of 1950 authorise  the, imposition  of tax on the commodities in question  and  that the impugned notification is otherwise consistent with,  and justified  by, the said provision of the Act.  Now,  if  the said M. B. Act authorises the imposition of tax on the goods in  question  and  the  said  goods  were  not  declared  by Parliament by law to be 933 essential  for the life of the community before the date  of the  said:  Act  its validity cannot be  challenged  on  the ground that it was not reserved for the consideration of the President  and ha not received his assent.  It is only  when all  the  conditions prescribed by Art. 286(3)  are  present that  the validity of the impugned law can  be  successfully challenged. The question about the construction of Art. 286(3) has  been considered  by this Court on two occasions.  In Sardar  Soma Singh  v.  The State of Pepsu and Union of India(,),  S.  R. Das,  J.,  as  he  then was, who spoke  for  the  Court  has observed that it is quite clear that s. 3 of Act 52 of  1952 does not affect the Ordinance there challenged for the  said Ordinance  was not made after the commencement of  the  Act, and that Art. 286(3) contemplates a law which can be but has not  been reserved for the consideration of  the’  President and  has  not received his assent.   This  position  clearly points  to  post-constitutional  law for  there  can  be  no question  of  an existing law continued by  Art.  372  being reserved   for  the  consideration  of  the  President   for receiving his assent.  This decision supports the conclusion that  the law contemplated by the first condition  specified in Art. 286(3) must be post constitutional law.  To the same effect are the observations made in the majority judgment of this Court in Firm of A. Gowrishankar v. Sales Tax Officer, Secunderabad  (2). In this connection it would be relevant to refer to s. 3  of the  Act  itself.  It provides that no law  made  after  the commencement of this Act by Legislature of a State  imposing or  authorising  the  imposition of t tax  on  the  sale  or purchase  of any goods declared by this Act to be  essential for  the life of the community shall have effect  unless  it has been reserved for the consideration of the President and has received his (1)  (1954) S.C.R. 955. (2)  A.I.R. 1958 S.C. 883.

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934 assent.  This provision also shows that the declaration made by  the Act was intended to be prospective in operation  and it would affect laws made after the commencement of the Act, and  that  clearly must mean that if a law had  been  passed prior  to the commencement of the Act and it authorised  the imposition  of  a  tax on the sale or  purchase  of  certain commodities its validity cannot be challenged on the  ground that the said commodities have been subsequently declared by the Act to be essential for the life of the community.   The impugned  notification with which we are concerned  and  the Act  under  which it has been issued are  thus  outside  the purview  of  s.  3 of the Act.  That  in  substance  is  the finding  made  by the High Court on  the  second  contention raised  before  it by the appellant.  In  our  opinion,  the conclusion of the High Court on t is point is right. In the result the appeals fail and are dismissed with costs. Appeals dismissed.