TMI Blog1955 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of assessment. Under the second head of exemption the assessee claimed that a sum of Rs. 13,66,496 and odd should be deducted for the first period of assess- ment and a sum of Rs. 22,37,919 and odd should be deducted for the second period of assessment. Both these claims were rejected by the Sales Tax Officer, who made the final order of assessment on the 22nd of July, 1949, for the first period and on the 24th of September, 1949, for the second period. The assessee preferred appeals against both these assessments to the Commissioner of Chotanagpur. Both the appeals were dismissed on the 29th of April, 1950. The assessee took the matter in revision to the Board of Revenue, which rejected the applications on the 30th of August, 1952, and confirmed the assess- ments made by the Sales Tax Officer subject to some modification. At the instance of the assessee, however, the Board of Revenue has stated a case and referred certain questions of law to the High Court under section 25(1) of the Bihar Sales Tax Act (Bihar Act XIX of 1947). Before proceeding to consider the questions submitted in the state- ment of the case, it is convenient to set out the relevant statutory pro- vision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge: Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930), the sale of any goods, which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in section 4 of that Act is made, shall, wherever the said contract of sale is made, be deemed for the purposes of this Act to have been made in Bihar". Section 2 (g) was amended by Bihar Act VI of 1949 and after the amendment it reads as follows: "'Sale' means, with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of pro- perty in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge: Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930), the sale of any goods- (i) which are actually in Bihar at the time when in respect thereof, the contract of sale as defined in section 4 of that Act is made, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works order" the Jamshedpur factory initiates a "rolling" or "manufacturing" programme. After the goods are manufactured, the Jamsehdpur factory sends the invoice to the Controller of Accounts who prepares the forwarding notes, and on the basis of these forwarding notes railway receipts are prepared. The goods are loaded in the wagons at Jamshedpur and despatched to various stations, but the consignee in the railway receipt is the assessee itself and the freight also is paid by the assessee. The railway receipts are sent either to the branch offices of the assessee or to its bankers, and after the purchaser pays the amount of consideration, the railway receipt is delivered to him. These facts are admitted and the correctness of these facts are not disputed by the State of Bihar. On the basis of these facts, the Attorney-General of India appearing on behalf of the assessee submitted the argument that the passing of title took place outside the Province of Bihar and the delivery of goods to the purchaser was also made outside the Province of Bihar. The learned Attorney-General submitted further that the contract of sale was also concluded outside the Province of Bihar. It was conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngredients, like agreement of sale, passing of title, and delivery of goods. But it is not necessary for the purpose of legislative jurisdiction that all the legal ingredients of sale or even the transfer of title should have taken place within the Province. It is sufficient if there is some territorial nexus or connection between the taxing authority and the transaction sought to be taxed. In my opinion the fact that the goods are manufactured in Bihar constituted a suffici- ent territorial nexus or connection which confers jurisdiction upon the Provincial Legislature to impose the tax. This opinion is supported by the decision of the judicial Committee in the case of Wallace Brothers and Company, Limited v. Commissioner of Income-tax(1). In that case, the Income-tax authorities of India imposed a tax upon a company incorporated in England having its registered office there but carrying on business in India. The Income-tax authorities imposed a tax on the company not merely with respect to the income received in India, but also with respect to the income received in England. It was held by the judicial Committee that the major portion of the income of the com- pany was derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be reversed so far as the interpretation of Article 286(1)(a) and Article 286(2) of the Constitution was concerned. It was held by the majority of the learned Judges that Article 286(2) prohibited the imposi- tion of any tax on sales and purchases of goods even though the goods had actually been delivered as a direct result of such sale or purchase for the purpose of consumption in the taxing State. But none of the learned judges expressed any opinion as to the correctness of the earlier decision of the Supreme Court in The United Motors' case(1) on the doctrine of nexus. The authority of the previous decision of the Supreme Court in The United Motors' case(1) on this point has, therefore, not been affected or in any way shaken by the subsequent decision of the Supreme Court in The Bengal Immunity case(2). The doctrine of nexus has also been applied by the Supreme Court in another sales tax case, Poppatlal Shah v. The State of Madras(3). That was the decision of a unanimous Court of five Judges, namely, Patanjali Sastri, C.J., Mukherjea, Vivian Bose, Ghulam Hasan and Bhagwati, JJ. In that case, the appellant company received orders in its Madras office from Calcutta merchants f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for purposes of the Province itself. It admits of no dispute that a Provin- cial Legislature could not pass a taxation statute which would be bind- ing on any other part of India outside the limits of the Province, but it would be quite competent to enact a legislation imposing taxes on transactions concluded outside the Province, provided that there was sufficient and a real territorial nexus between such transactions and the taxing Province. This principle, which is based upon the decision of the Judicial Committee in Wallace Brothers etc. Company v. Commis- sioner of Income-tax, Bombay(1), has been held by this Court to be appli- cable to sales tax legislation, in its recent decision in the Bombay Sales Tax Act case (Civil Appeal No. 204 of 1952)(2) and its propriety is beyond (1) [1948] F.C.R. 1; 16 I.T.R. 240. (2) [1953] S.C.R. 1069; 4 S.T.C. 133. question. As a matter of fact, the legislative practice in regard to sales tax laws adopted by the Provincial Legislatures prior to the coming into force of the Constitution has been to authorise imposition of taxes on sales and purchases which were related in some manner with the taxing Province by reason of some of the ingredien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not constitute sufficient territorial nexus. The learned Attorney-General submitted that there must be a (1) (1940) 311 U.S. 435. real and relevant nexus, otherwise the Provincial Legislature would not have jurisdiction to impose the sales tax. I am unable to accept the argument that there is no sufficient territorial connection in this case. In my opinion, the manufacture or production of goods by the assessee within the Province constitutes a real territorial nexus and the Provincial Legislature is clothed with jurisdiction to impose the tax upon the assessee, by reason of the manufacture or production of goods within the Province. Legally speaking a transaction of sale is not merely a contract; it is a contract plus a conveyance. The location of the goods is, there- fore, a paramount factor in deciding what are the legal consequences of the transaction. I shall illustrate this point by analogy. In the realm of private international law the lex situs is the paramount law applicable in the case of transfer of movable properties. It is well-settled that even if the proper law of transfer (lex actus) differs from the lex situs of the tangible movable at the time of the transfer, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the sales tax imposed on the producer or manufacturer upon his first sale is levied upon him qua seller and not qua manufacturer or producer. In Province of Madras v. Messrs. Boddu Paidanna(1) it was held by the Federal Court that the power of the Provincial Legislature to levy a tax on the sale of goods extends to sales of every kind, whether first sale by the manufacturer or not, and the provisions of the Madras General Sales Tax Act, 1939, imposing a tax upon the first sales by the manufacturer were not ultra vires of the Provincial Legislature. In view of the ratio of this case, I do not think there is much substance in the point taken by the Attorney- General. In the course of his argument, the learned Attorney-General referred to Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai Prakash(2). But the decision of this case has no bearing on the question at issue in the present case. The point for decision in the Supreme Court case was whether the power to impose a tax on the sale of goods under Entry 48 included a power to impose a tax on forward contracts. The statutory provisions which were challenged in that case were section 2(h) of the U.P. Sales Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 4(1) of the Act as it originally stood imposed the liability to pay sales tax on dealers only from such date as the Provincial Government may by notification in the Official Gazette appoint. It appears that the Provincial Government did not issue any notification and, therefore, Ordinance III of 1948 was passed amending section 4(1). Section 4(1) after being amended by the Ordinance imposed the liability to pay sales tax upon the dealers from the date of the commencement of the Act, namely from the 1st of July, 1947. Act VI of 1949 replaced Ordinance III of 1948 and section 16 of this Act gave retrospective effect to the amended section 4(1). Section 16 provided that "the substituted sub-section (1) shall form part and always be deemed to have formed part of the Act with effect from its commencement, namely, the 1st July, 1947". It was pointed out by the Attorney-General that Act VI of 1949 was enacted on the 22nd of March, 1949. It was maintained that the Bihar Legislature was not competent to impose a sales tax retrospectively with effect from the 1st of July, 1947, by this amending Act. The contention of the assessee was that sales tax, though payable by the dealer, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as a matter of construc- tion the Courts presume that a statute is not intended to be given retrospective effect unless the intention is made clear by express words or by necessary implication. That is however only a canon of construc- tion and not a constitutional principle. To adopt the language of Frankfurter, J., in a recent American case, the ultimate touchstone of constitutionality is the Constitution itself and not any general principle outside it. In my opinion, therefore, the argument of the learned Attorney-General on this point must fail. My concluded opinion is that the provisions of section 2(g) of the Bihar Sales Tax Act (Bihar Act XIX of 1947) as amended by Bihar Act (1) [1940] F.C.R. 110. VI of 1949 are constitutionally valid and that the Bihar Legislature had the Constitutional power and authority to enact section i6 of the Bihar Act VI of 1949 expressly making the newly substituted section 4W retrospective with effect from the 1st of July, 1947. I accordingly answer the first two questions against the assessee and in favour of the State of Bihar. I now proceed to consider the question whether the Sales Tax Department was right in including the amount of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88; A.I.R. 1954 Mad. 856. of Bihar that a contrary view has been taken by a Bench of this Court in Messrs. Kaniram Janki Das v. The State of Bihar(1). But that authority is distinguishable. The basis of that decision was that there was no provision in the statute empowering the registered dealer to realise sales tax from the purchaser, and in the absence of such a provision it should be taken that the entire amount payable by the purchaser including sales tax was the sale price of the goods supplied. But this reasoning is no longer sustainable in view of the amendment made by Bihar Act VI of 1949. By this Amending Act, section 14A was for the first time introduced and a registered dealer was empowered to make collection of sales tax from the consumers in accordance with such restrictions and conditions as may be prescribed. The Amending Act also introduced section 26(j) which imposes a penalty on unregistered dealers who realise sales tax from purchasers. In view of these statutory amend- ments it is clear that the basis of the decision in Kaniram Janki Das v. The State of Bihar(1) is gone and that decision cannot apply to the present case. For the reasons I have already expressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were concluded outside the State of Bihar was invalid after the 26th of January, 1950, when the Constitution was promulgated. In my opinion, the argument of the Attorney-General is not correct. It is well established that the Articles of the Constitution are not retrospective and that the Articles do not affect transactions which are past and closed or rights which have already vested or liabilities which have already accrued (see the decision of the Supreme Court in Keshavan Madhava Menon v. The State of Bombay(1)). In the present case, the sales tax has been levied upon the assessee long before the Constitution came into force. The levy of sales tax was imposed under sections 4 and 2(g) of the Bihar Sales Tax Act after amendment by Bihar Act VI of 1949 which came into force on the 1st of October, 1948. The charge of sales tax, or in other words the liability to pay sales tax was, therefore, imposed on the assessee with effect from the 1st of October, 1948. The Sales Tax Officer had made orders of assessment on the 22nd July, 1949, and 24th of September, 1949, for the two periods in dispute. It is true that the Commissioner of Chotanagpur disposed of the appeals preferred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, M.R., after accepting the passage from Lord Dunedin's judgment quoted above, observed as follows: 'Lord Dunedin, speaking, of course, with accuracy as to these taxes, was not unmindful of the fact that it is the duty of the subject to whom a notice is given to render a return in order to enable the Crown to make an assessment upon him; but the charge is made in consequence of the Act, upon the subject; the assessment is only for the purpose of quantifying it". Applying the principle to the present case, it is clear that the levy of sales tax upon the assessee was made and the liability of the assessee to pay sales tax had accrued long before the Constitution came into force. In my opinion, Article 286 of the Constitution has no retrospec- tive force; and the assessments of sales tax upon the assessee under section 4(1) read with section 2(g) of the Bihar Sales Tax Act are legally valid. I further hold that the Commissioner of Chotanagpur was not bound to decide the appeal according to Article 286 of the Constitution. It follows that the fifth and sixth questions referred by (1) [1947] 15 I.T.R. 302 at p. 308. (3) (1930) 16 Tax Cas. 1, at p. 19. (2) (1926) 10 Tax Cas. 88. the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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