Sukhdev Singh Kang, J.
1. In this bunch of 26 writ petitions (C.W.P. Nos. 835, 444, 658, 716, 1059, 1099, 1114, 1169, 1243, 1244, 1574, 1827, 1869, 1870, 2209, 2373, 2376, 2574, 3745, 5683, 6318, 7072, 7073, 7601 of 1987 and 5598, 6781 of 1986) challenge is made to the constitutional validity of entry 2-B of Schedule D and Section 17 of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as 'the Act') and they seek to quash the instructions dated May 15, 1985, issued by the Commissioner, Excise and Taxation, Haryana and the orders/notices passed/issued by the authorities.
Factual matrix shall be provided by C.W.P. No. 835 of 1987 :
The petitioner is a registered dealer under the Act and is engaged in the business of sale and purchase of paddy and rice at Karnal. The petitioner filed the returns for the assessment year 1982-83 in accordance with Section 25 of the Act and deposited the tax in accordance with the returns. The Assessing Authority issued notice under Section 28 of the Act for finalisation of the assessment. During the course of assessment proceedings, the petitioner was told that the Assessing Authority wanted to levy tax on sales of paddy made to Messrs. Subhash Cereals and Pulses Processing Institute, Karnal (and other exempted dealers), who were granted registration certificates and were exempted from payment of tax under Section 13 of the Act. The sale of paddy to these exempted units amounted to Rs. 11,30,733.35 on which tax at the rate of 4 per cent would come to Rs. 45,229.32.
Rice and paddy are declared goods under Section 14 of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act') and are also mentioned in Schedule D to the Act and there is only single point tax on paddy and rice and the same can be levied only on the 'last purchase in the State by a dealer liable to pay tax under the Act'. In the scheme of single point tax the levy is confined to a single point in a series of sales or purchases by successive dealers. The petitioner during the assessment year 1982-83, sold rice to the District Food and Supplies Controller under the Rice Procurement Levy Order, 1979, prior to the enforcement of the Forty-sixth amendment of the Constitution and definition of expression 'sale' amended by Haryana Act 11 of 1984. In law, these transactions would not amount to sale. So, the inclusion of the 'sale of rice' under the Rice Procurement Levy Order in the expression 'taxable turnover' was without jurisdiction. The Excise and Taxation Commissioner, Haryana, had issued instructions dated May 15, 1985, to all the assessing and subordinate authorities to examine all the cases of sales by the dealers of rice and paddy to exempted units. A copy of these instructions has been appended as annexure P-2 in C.W.P. No. 716 of 1987. Since the instructions had been issued by the Excise and Taxation Commissioner, Haryana, the petitioner did not expect that the authorities under the Act will be able to decide the matters uninfluenced by those instructions. The petitioner has invoked the extraordinary jurisdiction of this Court without availing of the alternative remedies of appeal, second appeal or revision provided by the Act.
It has been pleaded that the provisions of entry 2-B in Schedule D to the Act are vague. They do not clearly spell the taxing event, indeed, has been specified but the provisions are still vague as to the person by whom the tax is to be paid. The provisions, thus, offend Articles 14 and 286 of the Constitution. A person who is granted exemption from payment of tax under Section 13 of the Act cannot be termed as a dealer who is not liable to pay tax. Such a person still remains liable to pay tax in accordance with entry 2-B in Schedule D read with Section 17 of the Act. Last purchase in the State is by the dealers who have been exempted from payment of sales tax but they are still dealers liable to pay tax and it is they (the exempted dealers) being the last purchasers who are liable to pay tax. The petitioner had sold paddy to the exempted dealers. They do not remain the last dealers liable to pay tax in the State. Cases cannot be reopened on the basis of instructions or objections raised during audit. Facts in the other writ petitions are similar to the facts of C.W.P. No. 835 of 1987.
2. The writ petitions have been resisted by the respondents. It is pleaded, inter alia, that Section 17 read with entry 2-B of Schedule D to the Act merely defines the stage of levy of tax on paddy. It is last purchase in the State by a dealer liable to pay tax under the Haryana Act. The petitioner has shown sales of paddy to Subhash Cereals and Pulses Institute, Karnal, which unit was found to be not engaged in any manufacturing activities according to Khadi Gram Udyog Commission, Ambala Cantt., who conducted an enquiry against this unit in 1982 and came to the conclusion that the sale transactions to it were only paper transactions. The exemption certificate to this unit was issued on the recommendations of the Khadi Gram Udyog Commission. It was entitled to purchase and sell goods without payment of tax. Accordingly, the said exempted unit was not a dealer liable to pay tax on paddy. The petitioner was, therefore, the last purchaser of paddy liable to pay tax and has accordingly been taxed vide assessment order dated November 2, 1986. It was further alleged that the transactions of sale of paddy by the petitioner to Subhash Cereals and Pulses Processing Institute, Karnal, were bogus and only paper transactions, in order to claim deduction from the turnover and evade payment of tax. It was admitted that a Division Bench of this Court in Food Corporation of India v. State of Haryana [1987] 66 STC 7, has held that the Food Corporation of India was not liable to pay tax. It was further averred that the writ petitions of private rice shellers (C.W.P. Nos. 4283 and 4165 of 1986 and others) had been decided on February 11, 1987 Shiam Lal Sunder Lal v. State of Haryana, [1987] 66 STC 37 (P&H;) Shiam Lal Sunder Lal v. State of Haryana [1987] 66 STC 37 (P&H;)., and it was held that the rice shelter owners were liable to pay tax even for the sale of rice in pursuance of the Haryana Rice Procurement Levy Order, 1979. It was contended that the impugned provisions were legal, valid and constitutional. The stage of levy of tax on paddy was on a dealer if it answers the following requirements :
(a) that he must be the last purchaser of paddy within the State of Haryana ;
(b) that he must be a dealer liable to pay tax under the Act.
3. The purchaser of paddy from the petitioner was Subhash Cereals and Pulses Processing Institute, Karnal, who were exempted from payment of tax under Section 13 of the Act. They were not liable to pay tax although they were the last purchasers of paddy in this case. In the case of a sale to an exempted unit, it is not liable to pay tax ; rather the immediately preceding dealer is liable to pay tax. In this case, the taxable event is the last purchase of paddy within the State of Haryana. The taxable person is the dealer liable to pay tax under the Haryana Act. The rate of tax stands specified at 4 per cent of the purchase value of the paddy. There is no vagueness in the charging provision. Purchaser of paddy from the petitioner is exempted from payment of tax. That being so, the purchaser of paddy from the petitioner is not liable to pay tax under the Haryana Act. It is averred that the instructions dated May 15, 1985, are only elucidation of entry 2-B of Schedule D to the Haryana Act and are, therefore, legal in every respect. These instructions give full freedom and discretion to the Assessing Authorities to arrive at independent conclusions as is evident from the following extract from the instructions :
'In view of the above, it is very essential that each and every transaction of sale of paddy by the rice sheller owners to the exempted units under Section 13 should be thoroughly scrutinised and the conclusion drawn on merits after taking into account the relevant factors such as those mentioned in 3rd proviso to Section 27(1)(a)(iii) of the Haryana Act ibid. and the capacity of the purchasing unit concerned, the period for which it actually worked, the units of electricity consumed by it, etc., etc.'
In order to judge whether the impugned provisions suffer from the vice of vagueness and ambiguity, it is apposite to read the provisions of Section 17 and entry 2-B of Schedule D to the Act at the very outset :
'Section 17. Tax on declared goods.--Tax on declared goods shall be leviable and payable at the stage of sale or purchase, as the case may be, under the circumstances specified against such goods in Schedule D.'
'Serial No.
Name of declared goods.
Circumstances under which tax to be levied.
Stage of levy.
2-B.
Paddy
In all cases
Last purchase in the State by a dealer liable to pay taxunder this Act.'
A perusal of the above provisions makes it clear that all the requirements of a valid charging section have been incorporated in the impugned provisions. The commodity to be taxed has been mentioned. The circumstances under which tax is to be levied have been spelt out. The stage of levy of tax and the person liable to pay tax have been defined. The last purchase in the State of Haryana by a dealer liable to pay tax under this Act is also defined. It takes care of the stage at which the tax has to be paid and the person who is to pay the tax.
4. The constitutional validity of Sub-section (1) of Section 5 of the Punjab Act was examined by the Apex Court in Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 and their Lordships came to the conclusion that since a single ascertainable point of taxation had not been specified and no machinery by which a dealer could ascertain as to which person was made liable to pay tax, the impugned provision was unconstitutional. After this decision; all the infirmities pointed out by the Supreme Court were removed by amending the Act. The amending Act added Sub-section (3) to Section 5, which provides 'in respect of the declared goods, tax shall be levied at one stage and that stage shall be, in the case of goods liable to purchase tax, the stage of purchase of such goods by the last dealer liable to pay tax under this Act.' It is evident that the material part of Sub-section (3) of Section 5 is analogous to the impugned provisions. It also provides that in respect of the declared goods, tax shall be levied at the stage of purchase of such goods by the last dealer liable to pay tax under this Act. There is no difference between the language of the two statutes. The provisions of Sub-section (3) of Section 5 of the Punjab Act were challenged in Niamat Rai Milkh Raj Ahuja v. State of Punjab [1968] 22 STC 365 and a Division Bench of this Court held that the provisions of Section 5(3) of the Punjab General Sales Tax Act, 1948, as amended, were not violative of Articles 303 and 14 of the Constitution or Section 15 of the Central Sales Tax Act, 1956. On the parity of the reasoning, the impugned provisions also do not violate Article 14 of the Constitution or Section 15 of the Central Sales Tax Act. They are not violative of Article 286 of the Constitution. They are perfectly legal, valid and Constitutional.
5. This brings us to the next and the vexed question as to whether a person who has been exempted from payment of tax under Section 13 of the Act remains a dealer liable to pay tax under this Act. To determine this issue, it will be appropriate to look at the relevant statutory provisions and orders of exemption :
'13. Power to exempt.--(1) The State Government, if satisfied that it is necessary or expedient so to do in the interest of cottage industries or rural tiny industries may by notification, exempt any class of co-operative societies or rural tiny industrial units or persons from the payment of tax under this Act on the purchase or sale of any goods subject to such conditions as may be specified in such notification.
(2) Where a notification under Sub-section (1) has been issued by the State Government,--
(a) a registered dealer shall not be entitled to charge tax on the sale made to such societies, industrial units or persons ;
(b) such sales shall not be included in the turnover of such registered dealer notwithstanding anything to the contrary contained in Section 27 ;
(c) a registered dealer shall be entitled to deduct from his taxable turnover the purchase value of goods specified in Schedule C to the extent such goods are sold by him to such societies, industrial units or persons notwithstanding anything contained in Section 27.
Explanation.--For the purposes of this section, 'rural tiny industrial unit' means an industrial unit set up in a rural area, after coming into force of the Haryana General Sales Tax (Amendment) Act, 1979, whose capital investment on machinery and equipment does not exceed one lakh rupees.'
6. In exercise of the powers conferred by Sub-section (1) of Section 13 of the Act, the Government of Haryana had issued a notification exempting societies from payment of tax under the Act on the purchase or sale of any goods from the date of publication of the said notification. Exemption was granted subject to certain conditions. It was stipulated that if the holder of the exemption certificate fails to comply with any of the requirements/ conditions specified in the exemption certificate, he shall be liable, by an order passed by the Assessing Authority in writing, to pay tax on all purchases made, which he could have paid had he not been granted the exemption certificate. The grant of exemption pre-supposes the liability to pay tax. A dealer in certain specified cases is allowed exemption from payment of tax. The exemption does not take away the statutory liability of such an exempted dealer from the payment of tax. That liability remains there. Only the department waives off the right to collect tax from the exempted dealer. Notwithstanding the exemption, the exempted dealer remains a dealer liable to pay tax under this Act. The exemption is not complete. It is circumscribed by many conditions. One of them has been reproduced above. It says that in case of violation of the requirements and conditions of exemption, the dealer will be held liable to pay tax. In certain cases, exemption from payment of whole of the amount of tax is not granted, i.e., a dealer is required to pay a part of the tax and the remaining part is exempted. The learned Advocate-General has not been able to bring to our notice any authority wherein it has been held that a person who is exempted from payment of tax ceases to be a dealer liable to pay tax under the Act. Consequently, we hold that the exempted dealers, notwithstanding the exemption, remain dealers liable to pay tax under the Act.
7. However, the authorities under the Act are not debarred from examining whether any transaction of sale to a dealer, including an exempted dealer, is a genuine and bona fide sale. If the stated sale is only a paper transaction, the same is only shown in collusion between the two dealers, surely the authorities can ignore that sale and hold the dealer who had allegedly sold paddy to the exempted dealer liable to pay tax. However, as an abstract proposition of law, a sale of paddy by a dealer to an exempted dealer shall absolve the selling dealer from payment of purchase tax, because the last purchase of paddy in that case shall be by a dealer liable to pay tax under the Act and in view of the impugned provisions, the last 'dealer shall be liable to pay the purchase tax.
8. In the present case, a finding has been recorded by the Assessing Authority that the petitioners had sold paddy to Subhash Cereals and Pulses Processing Institute, Karnal, Haryana Laghu Gram Udyog Samiti, Karnal and Cham Gram Udyog, Karnal. These units did not do any milling business. So, the transactions were only paper transactions. This fact was borne out by the letter dated March 8, 1983, by Member-Secretary, Haryana Khadi and Gram Udyog Board, Chandigarh and these sales were held to be taxed. The petitioners have not filed appeals because they pursued remedies by filing the present writ petitions.
9. We have carefully perused the instructions dated May 15, 1985. These instructions are only elucidation of statutory provisions. They do not in any manner hinder or restrict the discretion vested in the authorities under the Act. Directions have been issued only to re-examine the cases. No directions have been issued to pass particular orders, thus, encroaching upon the jurisdiction or influencing the minds of the authorities.
10. We partly allow these writ petitions and hold that the dealers exempted from payment of tax under Section 13 still remain dealers liable to pay tax under the Act. However, since a finding has been recorded that the transactions of sales to such dealers were not genuine and were only paper transactions, the petitioners are afforded an opportunity to file appeals as provided under the Act within a period of one month. The respondents shall not raise the question of limitation. In the cases in which the writ petitioners have challenged notices/letters, they shall be at liberty to raise all the defences available to them before the Assessing Authorities.