TMI Blog1960 (10) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... , Advocates of Messrs Rajinder Narain Co., for the Appellants. D.P. Singh, Advocate, for the respondents. -------------------------------------------------- The Judgment of the Court was delivered by RAJAGOPALA AYYANGAR, J.- These two appeals are from a common judgment of the High Court of Patna dated October 5, 1956, in two petitions under Article 226 of the Constitution and have been filed pursuant to a certificate granted by the High Court under Article 132. The Tobacco Manufacturers (India) Ltd. the appellants in the above appeals are an incorporated company manufacturing cigarettes and tobacco in their factory at Monghyr in the State of Bihar, and these appeals are concerned with the legality of the levy of sales tax under the Bihar Sales Tax Act (hereafter referred to as the Act) on the appellants in respect of sales effected during the financial years 1949-50 and 1950-51. The point urged in these appeals is a very narrow one and relates to the proper construction to be placed on certain orders of the Board of Revenue passed in regard to the tax properly leviable for these two years. The facts relevant to this point are briefly these: The assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the decision cited did or did not cover both the two (a) and (b) types of sales effected by the appellants, the Board: passed on August 28, 1953, a laconic order in these terms: "The two points urged in this Court were among those points urged in the lower Court and they are- (i) no tax should have been levied on the company's canteen sales, (ii) that despatches outside the State for consumption in other States should not have been taxed for the period after the Constitution came into force. ............................................................................................ As regards the admitted despatches of goods outside the State after the 26th January, 1950, when the Constitution came into force, the learned lower Court has been guided by the decision of the Board in the Bengal Timber case (Case No. 61 of 1952). But this ruling of the Board stands superseded by the subsequent decision of the Supreme Court in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133. According to the decision of the Supreme Court, no tax can be levied on despatches to the places outside the State after the 26th January, 1950, and on this point the petitions are allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was really required in view of the specific reference to the judgment of the Supreme Court in the United Motors case [1953] S.C.R. 1060; 4 S.T.C. 133. The petitions are, therefore, rejected." If the order of the Board dated August 28, 1953, was laconic and ambiguous, the later order dated April 25, 1955, was if anything more obscure. The appellants, however, considered it an order in their favour, because the petition by the State for clarification of the first order on the lines of the interpretation put upon it by the tax authorities had been dismissed, and when the refusal to refund the two sums of tax referred to earlier was continued, they filed two petitions to the High Court of Patna under Article 226 of the Constitution for the issue of writs of mandamus to compel the refund of the tax on the principal ground that a duty to do so had been imposed by the orders of the Board of Revenue, though the petition made an incidental reference to the appellants being entitled to such refund on a proper construction of Article 286(1) and (2) of the Constitution, even apart from the order of the Board of Revenue. The learned Judges of the High Court however in the main considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60] 40 I.T.R. 618., in which it was held that when an order was made by a superior tribunal (in that case the Income-tax Appellate Tribunal) directing the Income-tax Officer to compute the income of an assessee on a particular basis and that order had become final, the subordinate officer had no right to disregard the direction, because it was wrong and that the High Court when approached by the assessee for the issue of a writ of mandamus, was bound to enforce the final order of the superior tribunal and could not refuse to do so because it considered the order of the tribunal to be wrong. This Court pointed out that when the order which the tribunal had jurisdiction to pass became final, it bound all parties to it and its correct- ness could not be challenged collaterally in proceedings for enforcing that order. The attempt of learned counsel for the appellants was to bring this case within the scope of the above ruling. The ratio of this decision is to be found in this passage: "By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1953] S.C.R. 1069; 4 S.T.C. 133, as applicable to all such sales. We find ourselves unable to agree in this construction of the order. We cannot presume that Mr. Bakshi did not peruse the judgment in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133, when he referred to it in his order, nor that he did not acquaint himself with the terms of the Explanation to Article 286(1) (a) of the Constitution, the scope and significance of which was analysed and elaborated in that decision. We are rather inclined to agree with the construction which the Member himself put on this order in April, 1955, that he left it to the Sales Tax Officer to decide for himself the relief to which the appellants were entitled on that officer's interpretation of the judgment of this Court. It may be that this was not a satisfactory method of disposing of the revision petition-leaving the point which arose for decision by the Member of the Board of Revenue, to be decided by the Sales Tax Officer, but we are now only concerned with the simple question whether Mr. Bakshi had or had not deter- mined the true scope and effect of the judgment of this Court and decided it as meaning that all sales as a result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Income-tax Civil Appeal 407 of 1956, since reported at [1960] 40 I.T.R. 618, is inapplicable. We might also point out that even if the decision applied and the High Court issued an order in the nature of mandamus to the Sales Tax Officer, it could only take the form of a direction to effect the reassessment in the light of the decision in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133-an order which would leave the appellants in the same position in which they now find themselves without such an order by the High Court. The next question for consideration is whether on a proper construction of the decision in the United Motors case[1953] S.C.R. 1069; 4 S.T.C. 133, the exclusion of type (b) sales from those exempted under Article 286(1) was erroneous. Mr. Chatterjee, learned counsel for the appellants sought to establish that this Court had decided in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133, three points: (1) that sales as a result of which goods were delivered in a State for consumption in such State i.e., the sales falling within the Explanation to Article 286(1) were fictionally inside that State for all purposes and so within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umption in the State are made the determining factors in locating a sale or purchase will presently appear. The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test: Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase, for the purpose of consumption therein? Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States. The latter States are prohibited from taxing the sale or purchase; the former alone is left free to do so. Multiple taxation of the same transaction by different States is also thus avoided." In our opinion, this passage explains the scope of the Explanation and deals with what might be termed "Explanation sales". If there is a sale falling within the terms of the Explanation, it is "inside" the State of delivery-cum-consumption and that State alone can levy the tax. Such a sale is outside all other States, which are prohibited from taxing such a sale by reason of any territorial nexus however close or cogent. The passage extracted, however, does not deal with cases where the sale in question does not satisfy the requirements of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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