9911796707
TMI Blog1960 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 286(1)(a) of the Constitution as it stood before the recent amendment. The India Copper Corporation Ltd. (referred to hereafter as the assessee company) carries on business in copper and various other materials and mineral products and the office of its General Manager is in the district of Singhbhum in Bihar. The period covered by the assessment now in dispute is January 26, 1950, to March 31, 1950. The normal practice of the assessee-company was to deposit sums of money from time to time provisionally towards payment of sales tax in advance and have the amount finally adjusted after the completion of the assessment of each year. The assessee-company followed this practice in respect of the amount of sales tax due by it for the year 1949-50. For the financial year April 1, 1949, to March 31, 1950, the Superintendent of Sales Tax, Singbhum, computed the tax liability of the company in the sum of Rs. 3,60,703-4-0 by an order of assessment dated November 13, 1950, and the company made payment of the amount due by it beyond the sums already paid. It would be noticed that this financial year comprised two periods- (1) before the Constitution, viz., April 1, 1949, to January 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Court. In formulating the law applicable, the learned Judges drew a distinction between sales as a direct result of which goods were delivered in a State outside the State of Bihar and consumed in that State and those cases in which the goods thus delivered, were not consumed in the State of first destination, but were re-exported from the State of first destination to other States. They held that the first category of sales were covered by the Explanation to Article 286(1)(a) of the Constitution and were "inside" the State of first delivery and consequently "outside" the State of Bihar within the meaning of the Article and therefore exempt from tax by the Bihar State. In regard, however, to the second category of sales, it was held that they were not within the Explanation and were there- fore outside the constitutional exemption under Article 286(1)(a). The assessee-company not being satisfied, filed an application to the High Court for a certificate of fitness under Articles 132 and 133 of the Constitution, but this having been rejected, they applied to and obtained special leave from this Court under Article 136 of the Constitution and that is how the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." The scope and the purpose of this Explanation was discussed and explained by this Court in The State of Bombay v. United Motors (India) Ltd. and Others [1953] S.C.R. 1069 at page 1081 4 S.T.C. 133., and it is the passage in this judgment extracted below on which reliance was placed by the learned counsel in support of his submission: "............................The authors of the Constitution had to devise a formula of restrictions to be imposed on the State power of taxing sales or purchases involving inter-State elements which would avoid the doubts and difficulties arising out of the imposition of sales tax on the same transaction by several Provincial Legislatures in the country before the commencement of the Constitution. This they did by enacting clause (1)(a) with the Explanation and clause (2) of Article 286. Clause (1)(a) prohibits the taxation of all sales or purchases which take place outside the State, but a localised sale is a troublesome concept, for, a sale is a composite transaction involving as it does several elements such as agreement to sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the terms of the "Explanation" would not be satisfied unless the delivery was for the purpose of consumption therein, i.e., in the State of first destination. If the terms of the Explanation were satisfied, the State of "delivery-cum-consumption", (to coin a convenient expression to designate the State in which goods are delivered as a direct result of the sale for the purpose of consumption therein), used in the Explanation, would have power to tax the sale as being one fictionally "inside" it. In such an event all the other States in India, barring that State would be prevented from taxing that sale because the sale would be "outside" those States. This however, it was urged, would not exhaust the operation of the Explanation, but further that the Explanation was exhaustive of what the Constitution-makers conceived to be a sale which alone may be the subject of tax by a State. The deduction learned counsel made from these premises was two-fold: (1) that in cases where goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first destination, the conditions of the Explanation were satisfied and the sales b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State" is capable of being understood in more senses than one. It could be understood as comprehending cases where no element or ingredient which constitutes a sale takes place within the State; in other words as applying solely to those cases where there exists no territorial nexus between the State imposing the tax and the sale. Obviously, this could not have been intended to be incorporated in Article 286(1) because the tax in such cases would be beyond the legislative power of the State under Entry 54 of the State List read with Article 246 of the Constitution. The expression "outside" has therefore to be understood not as a sale so "outside" as not to have any territorial connection between the State in question and the sale, but in a somewhat narrower sense. The real difficulty arises in ascertaining the precise content of the narrower sense in which the word is used as meaning a sale in substance "outside" the State, though there might be some elements of the sale which if the exemption under Article 286(1)(a) were not enacted, would enable a State to levy a tax on the sale on the ground that it was within the legislative power of the State under Article 246 read with Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Storage & Distributing Co. of India, Ltd. v. Commercial Tax Officer and Others, etc. C.A. 751 of 1957 and C.A. 10 of 1958: since reported at [1960] 11 S.T.C. 764., "By sale here [Article 286(1)(a)] is meant a completed transaction by which property in the goods passes. Before the property in the goods passes, 'the contract of sale is only executory, and the buyer has only a chose in action.'.................The Constitution thinks in terms of a completed sale by the passing of property and not in terms of an executory contract for the sale of goods." Notwithstanding that is not an "outside" sale, the power of the State to tax might be negatived by the operation of the Explanation which by its non-obstante clause shifts the situs of the sale and renders the sale transaction one within the delivery-cum-consumption State, i.e., as the State in which the sale transaction must be deemed to take place. Where the terms of the Explanation are satisfied, the sale transaction will, by a legal fiction created by it, be deemed to take place "inside" the State of delivery and therefore "outside" the State in which the property passes. The conclusion reached therefore is that where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted that the sales which were the subject of the claim for refund involved a delivery of the goods outside the State of Bihar for consumption in the State of first destination and the State of Bihar not having filed any counter-affidavit challenging the correctness of these allegations, the High Court should have held that the terms of the Explanation were satisfied and should have ordered the refund claimed. We however consider that this submission is without force. Neither in the claim put forward in Exhibit "A" nor in paragraph 9 of the peti- tion was any distinction drawn between sales under which deliveries were effected outside the State of Bihar for the purpose of consumption in the State of first destination and those in which the deliveries outside the State were effected for the purpose of consumption not in the State of first destination but in other States. In fact, this was made clear in the later paragraphs of the petition to the High Court from which it is apparent that the assessee-company made a claim for tax exemption in respect of sales in which the delivery took place outside the State of Bihar, whether the delivery was for the purpose of consumption in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-exported the goods that was not a matter with which the seller was concerned and would not affect the character of the sale as one falling within the Explanation to Article 286(1)(a). Learned counsel therefore urged that the learned Judges of the High Court went wrong in requiring proof on the part of the assessee that the goods were actually consumed within the State of first delivery outside Bihar and that this was an unwarranted addition to the requirements of the Explanation. We consider this submission well-founded and indeed the learned counsel for the respondent did not dispute that the actual order of the High Court went beyond the terms of the Explanation to Article 286(1)(a). The order of the High Court will, therefore, be modified by making it clear that if the goods were as a direct result of the sale delivered outside the State of Bihar for the purpose of consumption in the State of first delivery the assessee would be entitled to exemption of the sales tax imposed and that it would not be necessary for the assessee to prove further that the goods so delivered were actually consumed in the State of first destination. Subject to this modification, the appeal fails, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of the goods out of, the territory of India. 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 another State. (2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce: Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951. (3) No law made by the Legislature of a State imposing, or authorising the impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the State or in the course of import of the goods into, or export of the goods out of, the territory of India, or on sale of any goods where such sale took place in the course of inter-State trade or commerce. By the Explanation to Article 286(1)(a) which is incorporated by sub-section (2), section 33, of the Bihar Sales Tax Act, a sale is deemed to take place in the State in which the goods are actually delivered as a direct result of such sale for the purpose of consumption in that State even though under the law relating to sale of goods the property in the goods has by reason of such sale passed in another State. In The State of Bombay and Another v. The United Motors (India) Ltd., and Others [1953] S.C.R. 1069; 4 S.T.C. 133., it was held that since the enactment of Article 286(1)(a), a sale described in the Explanation which may for convenience be called an "Explanation sale" is taxable by that State alone in which the goods sold are actually delivered as a direct result of sale for the purpose of consumption in that State. The right to tax arises because the sale is deemed to take place in that State and outside all other States and the latter States are prohibited from ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin section 33(1)(a)(ii), section 33(2) and "Explanation sales" outside the State of Bihar. The appellant-company carries on the business of manufacturing copper and other mineral products in the State of Bihar. It has its registered office and its place of business in the District of Singhbhum in the State of Bihar and is registered as a "dealer" under the Bihar Sales Tax Act, 1947. The appellant-company sent out its products to various places in India in the year of assessment ending on March 31, 1950, and has paid the tax assessed by the Sales Tax Officer. The appellant is now seeking to obtain a refund of the tax paid for the period between January 26 and March 31, 1950, on the plea that the tax was paid under a misapprehension of the law. The High Court in an application under Article 226 of the Constitution directed the Sales Tax Authorities to refund so much of the tax as was not proved to have been paid in respect of sales of goods delivered and consumed in the State of first destination. On the goods delivered and consumed in the State of first destination outside Bihar, the appellant could not be called upon to pay sales tax. That is undisputed. The appellant als ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
