TMI Blog1960 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... n from payment of tax if the goods are, as a direct result of the sale, delivered in another State for the purpose of consumption in that State. - C.A. No. 210 of 1959, - - - Dated:- 7-11-1960 - DAS S.K, HIDAYATULLAH M., DAS GUPTA K.C., SHAH J.C. AND RAJAGOPALA AYYANGAR N. JJ. B.C. Ghose, Senior Advocate, (P.K. Chatterjee, Advocate, with him), for the appellant. R.C. Dutta, Advocate, for respondents Nos. 6 to 20. S.P. Varma, Advocate, for respondents Nos. 1 to 5. -------------------------------------------------- The Judgment of HIDAYATULLAH, DAS GUPTA and RAJAGOPALA AYYANGAR, JJ., was delivered by RAJAGOPALA AYYANGAR, J. The judgment of DAS and SHAH, JJ., was delivered by SHAH, J. RAJAGOPALA AYYANGAR, J.- The sole question which arises in this appeal, which comes by way of special leave is as to whether sales under which goods were delivered outside the State of Bihar for the purpose of consumption but not within the State of first delivery or first destination, are exempt from the levy of sales tax by the Bihar State by virtue of Article 286(1)(a) of the Constitution as it stood before the recent amendment. The India Copper Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evision etc. failed to secure to the assessee-company the relief which it claimed and thereafter it filed an application under Articles 226 and 227 of the Constitution before the High Court of Patna praying for the issue of a writ to quash the order of assessment dated November 13, 1950, and the orders rejecting the prayers for review, reassessment and refund and for a direction to the departmental authorities to refund the sum realised by them in so far as the tax related to sales as a result of which goods were delivered outside the State of Bihar for consumption outside the State of Bihar. The learned Judges of the High Court held that the order of the Superintendent of sales Tax, Singhbhum, dated November 13, 1950, should be set aside and that the matter should go back to the Superintendent to make a reassessment according to law for the post-Constitution period. A further direction was added requiring the respondent to refund to the assessee so much of the tax as had been paid in excess of the amount of reassessment to be made by the Superintendent in accordance with the law as laid down by the Court. In formulating the law applicable, the learned Judges drew a distinctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be for the purpose of consumption in the State of first destination, the learned Judges of the High Court erred in requiring the assessee-company to prove not merely that the goods were delivered for the purpose of consumption but further that the goods so delivered were actually consumed within that State. We shall now deal with these points in that order. Article 286(1)(a) together with the Explanation on whose construction the first point depends ran in these terms: Article 286(1).-No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b)......................................................................................... Explanation.-For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is left free to do so. Multiple taxation of the same transaction by different States is also thus avoided. It might be mentioned that this portion of the judgment is un- affected by the dissent expressed in the latter decision in The Bengal Immunity Company Ltd. v. The State of Bihar and Others [1955] 2 S.C.R. 603; 6 S.T.C. 446,. The argument based upon this passage was broadly on these lines: Article 286(1)(a) imposes a ban on the legislative power to levy a tax on sales which are outside the taxing State. What sales are outside is not easy to decide because that depends upon the situs of a sale, which cannot, in most cases, be located in any one place with certainty-being dependent on a variety of factors which might or might not converge. The Constitution-makers did not directly define what was meant by a sale that was outside the State but achieved the same purpose by explaining an inside sale with the result that what was not an in- side sale should be held to be an outside sale. It must however be pointed out that it was not disputed that the terms of the Explanation would not be satisfied unless the delivery was for the purpose of consumption ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ban imposed by Article 286(1)(a). All other States would be subject to that ban in respect of such sales. The learned Chief Justice however did not, in the passage extracted, deal with the case of sales which did not satisfy the terms of the Explanation . The situs of what might be termed non-Explanation sales has therefore to be determined independently of the terms of the Explanation. Such sales would be exempt from tax only if the sale took place outside the State but not otherwise. The next question is, does a sale take place outside the State, where as a result of the contract of sale, the property in the goods passes to the purchaser within the State; in other words, is a sale completed by the passing of property within the State not inside a State, for the mere reason that as a direct result of the sale the goods are delivered outside the State. The answer depends on the meaning to be attributed to the words a sale or purchase which has taken place outside the State occurring in the body of Article 286(1). The expression outside the State is capable of being understood in more senses than one. It could be understood as comprehending cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of that State in regard to which it could be predicated that the sale in question was not outside that State or in other words, the determination of the particular State in regard to which it could be said that the sale was inside that State. The key to the problem is afforded by two indications in the Article itself: (1) the opening words of Article 286(1) which speak of a sale or purchase taking place and (2) the non-obstante clause in the Explanation which refers to the general law relating to sale of goods under which property in the goods has, by reason of such sale or purchase, passed in another State. These two together indicate that it is the passing of property within the State that is intended to be fastened on, for the purpose of determining, whether the sale in question is inside or outside the State, and therefore, subject to the operation of the Explanation that State in which property passes would be the only State which would have the power to levy a tax on the sale. As was explained in the recent decision of this Court in Burmah Shell Oil Storage Distributing Co. of India, Ltd. v. Commercial Tax Officer and Others, etc. C.A. 751 of 1957 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-company to the Commissioner of Commercial Taxes, Bihar, Patna, in which the claim for refund of the tax paid was rested on the following grounds: After setting out that the tax on sales effected between the period January 26, 1950, to March 31, 1950, was not assessable by virtue of Article 286 of the Constitution, the application stated: Total sales of raw materials of copper and brass sheet and circles sold by us and despatched under railway receipts for buyers' consumption are as follows. Then followed the sales effected and the tax paid in respect of the sales. The claim in this form was annexed to and made part of the petition to the High Court under Articles 226 and 227 of the Constitution and in paragraph 9 of the petition, this letter was referred to and a copy thereof was incorporated and marked as A . In this paragraph which was the other matter relied on the claim for refund was said to be on sales made to buyers outside Bihar State for consumption . Learned counsel strongly pressed upon us that paragraph 9 and the annexure had clearly asserted that the sales which were the subject of the claim for refund involved a delivery of the goods outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o types of sales which we have already indicated. The last point that was urged by the learned counsel was that the learned Judges of the High Court erred in requiring the assessee to prove that the goods delivered outside the State of Bihar were actually consumed in the State of first destination before the exemption from tax could be availed of. In their judgment now under appeal the learned Judges have stated: The petitioner would not be entitled to exemption if the goods were not consumed in the State of first destination but were re-exported from the State of first destination to other States. Learned counsel for the appellant complained that under the Explanation to Article 286(1)(a) there need be no proof of actual consumption of the goods delivered in the State of first destination but that the Explanation was satisfied if the purpose of the delivery under the sale was for consumption in that State. If after a sale that satisfied that requirement, viz., for the purpose of consumption in the State of first destination, the buyer under such a sale for his own purposes re-exported the goods that was not a matter with which the seller was concerned and would not affe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by selecting some fact or circumstance which provided a territorial nexus with the taxing power of the State even if the property in the goods sold passed outside the Province or the delivery under the contract of sale took place outside the Province. Legislation taxing sales depending solely upon the existence of a nexus, such as production or manufacture of the goods, or presence of the goods in the Province at the date of the contract of sale, between the sale and the Legislating Province could competently be enacted under the Government of India Act, 1935-see The Tata Iron and Steel Co., Ltd. v. The State of Bihar [1958] S.C.R. 1355; 9 S.T.C. 267., and Poppatlal Shah v. The State of Madras [1953] S.C.R. 677; 4 S.T.C. 188. By Article 286 of the Constitution, certain fetters were placed upon the legislative powers of the States as follows: Article 286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Explanation .-For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 286 of the Constitution shall apply for the interpretation of sub-clause (i) of clause (a) of sub- section (1). By this amendment, on the taxing power of the Bihar State the same restrictions were engrafted on the pre-Constitution statute as were imposed by Article 286 of the Constitution upon post-Constitution statutes. This Court has held in The Bengal Immunity Co., Ltd. v. The State of Bihar and Others [1955] 2 S.C.R. 603; 6 S.T.C. 446., that the operative provisions of the several parts of Article 286, namely, clauses (1)(a), (1)(b) and (2) and clause (3) were in- tended to deal with different topics and one could not be projected or read into another. Therefore, by the incorporation of section 33 in the Bihar Sales Tax Act read with Article 286, notwithstanding the amplitude of the power otherwise granted by the charging section read with the definition of sale , a cumulative fetter of triple dimension was imposed upon the taxing power of the State. The Legislature of the Bihar State could not since January 26, 1950, levy a tax on sale of goods taking place outside the State or in the course of import of the goods into, or export of the goods out of, the terri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outside the State of Bihar in section 33(1)(a)(i), only the power to tax Explanation sales which do not take place within the State of Bihar is taken away, but not the power to tax non-Explanation sales in which though under the general law of sale of goods the property passes outside the State, there exists between the taxing power of the State and the sale a nexus as contemplated by the definition of sale in section 2(g). If the sale is one in which the goods have been delivered outside the State of Bihar, but not as a direct result of the sale or not for the purpose of consumption in the State of first delivery, the sale will not be covered by the Explanation, and the right to tax the sale, if arising otherwise under the Act relying upon the territorial nexus, will not be impaired by the prohibition imposed by clause (1)(a)(i) of section 33. The right of the State of Bihar to tax a sale relying upon a real territorial nexus not being impaired by section 33 of the Act, all sales as defined by section 2(g) of the Bihar Sales Tax Act are liable to be taxed, except those falling within section 33(1)(a)(ii), section 33(2) and Explanation sales outside the State of Bihar. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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