TMI Blog1968 (3) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... -3-1968 - SHAH J.C., RAMASWAMI V. AND MITTER G.K. JJ. M.C. Chagla, Senior Advocate (S.S. Shukla, with him), for the appellants. C.B. Agarwala, Senior Advocate (O.P. Rana, with him), for the respondent. -------------------------------------------------- The judgment of the Court was delivered by RAMASWAMI, J.- These appeals are brought, by special leave, from the judgment of the Allahabad High Court dated November 30, 1962, in Miscellaneous Sales Tax Reference No. 144 of 1958 and other connected references. The appellants are manufacturers and dealers of oil in the Province of Uttar Pradesh and they have their own depots outside the Province. For the financial year 1948-49 and the subsequent period from April 1, 1949, to January 25, 1950, the appellants had sent their goods to their depots outside the Province of Uttar Pradesh, for example, to Calcutta in the State of West Bengal before any contract of sale in respect of the goods was made. After the goods had reached the depots outside the Province of Uttar Pradesh, they were sold to various parties. The Sales Tax Officer of Uttar Pradesh assessed the outside sales of all the appellants to sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 935, authorised a Provincial Legislature, subject to the provisions of that Act, to make laws for the Province or for any part thereof. Section 100(3) of that Act provided that, subject to the two pre- ceding sub-sections, the Provincial Legislature had, and the Federal Legislature had not, power to make laws for any Province or any part thereof the respect to any of the matters enumerated in List II of the Seventh Schedule to that Act. The matter enumerated in entry 48 in List II was "taxes on the sale of goods and on advertisements". It was in exercise of this legislative power that the Uttar Pradesh State Legislature enacted Act 15 of 1948, which came into force on April 1, 1948. Section 3 of the Act provides as follows: "3. Liability to tax under the Act.-Subject to the provisions of this Act, every dealer shall pay on turnover in each assessment year a tax at the rate of 3 pies a rupee: Provided that- (i) the Provincial Government may, by notification in the official Gazette, reduce the rate of tax on the turnover of any dealer or class of dealers or on the turnover in respect of any goods or class of goods; (ii) a dealer whose turnover in the previous year is less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass any order under sub- section (3) adversely affecting any person unless an opportunity has been given to such person to be heard. (5) If the amount of assessment is reduced by the Revising Authority under sub-section (3), it shall order the excess amount of tax, if already realized to be refunded." Section 11 is to the following effect: "Statement of case to High Court.-(1) Within sixty days from the passing by the Revising Authority of any order under sub-section (3) of section 9 or sub-section (1) of section 10 affecting any liability of any dealer to pay tax under this Act, such dealer may, by application in writing accompanied by a fee of one hundred rupees, require the Revising Authority to refer to the High Court any question of law arising out of such order. (2) If, for reasons to be recorded in writing, the Revising Authority refuses to make such reference, the applicant may, within thirty days of such refusal, either- (a) withdraw his application (and if he does so, the fee shall be refunded), or (b) apply to the High Court against such refusal. (3) If upon the receipt of an application under clause (b) of sub- section (2), the High Court is not sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability the goods must have been manufactured or produced after and not before the agreement for sale. In other words, it is only necessary for the application of Explanation 11 that the goods must have been sold by the person who produced or manufactured them but there is no requirement that he must have manufactured or produced them after the agreement for sale. It is the admitted position in these appeals that the goods were manufactured or produced in Uttar Pradesh by the appellants carrying on business in Uttar Pradesh in those goods and therefore the appellants are liable to pay the tax on their sales irrespective of where and when the contracts for sale were entered into and also irrespective of the fact that the contracts were entered into after the goods had been exported out of Uttar Pradesh. We accordingly hold that the first question was rightly answered by the High Court. We proceed to consider the next, and more important, question arising in these appeals, namely, whether the deeming provision contained in section 2(h), Explanation 11(ii), of the Act was ultra vires the Government of India Act, 1935. It was argued by Mr. Chagla that the doctrine of nexus was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is sufficient to state that in a sale of goods the goods must of necessity play an important part, for it is the goods in which, as a result of the sale, the property will pass. In our view the presence of the goods at the date of the agreement for sale in the taxing State or the production or manufacture in that State of goods the property wherein eventually passed as a result of the sale wherever that might have taken place, constituted a sufficient nexus between the taxing State and the sale. In the first case the goods are actually within the State at the date of the agreement for sale and the property in those goods will generally pass within the State when they are ascertained by appropriation by the seller with the assent of the purchaser and delivered to the purchaser or his agent. Even if the property in those goods passes outside the State the ultimate sale relates to those very goods. In the second case the goods, wherein the title passes eventually outside the State, are produced or manufactured in Bihar and the sale wherever that takes place is by the same person who produced or manufactured the same in Bihar. The producer or manufacturer gets his sale price in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of a provision of that statute which is ultra vires, to that extent it would be acting outside the Act. In that event, a suit to question the validity of such an order made outside the Act would lie in a civil court. In this context it was pointed out by the majority judgment that the reasoning of the Judicial Committee in Raleigh Investment Co.'s case [1947] 74 I.A. 50; 15 I.T.R. 332., was based upon the assumption that the question of ultra vires can be canvassed and finally decided through the machinery provided under the Income-tax Act. The Judicial Committee held that section 67 of the Income-tax Act, 1922, was a bar to the maintainability of the suit. The argument on behalf of the assessee in that case was that an assessment was not an assessment "made under the Act" if the assessment gave effect to a provision which was ultra vires the Indian Legislature; that in law such a provision, being a nullity, was non-existent; and that an assessment justifiable in whole or in part by reference to, or by such a provision was more aptly described as an assessment not made under the Act than as an assessment made under the Act. The argument was negatived by the Judicial C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1958] S.C.R. 1355 9 S.T.C. 267., a reference was made by the Board of Revenue raising questions as to the validity of certain provisions of the Bihar Sales Tax Act and decided by the High Court, and ultimately by this Court. Similarly, in Sardar Baldev Singh v. Commissioner of Income-tax, Delhi Ajmer [1961] 1 S.C.R. 482 40 I.T.R. 605., in an appeal from the order of the Income-tax Appellate Tribunal with special leave, the constitutional validity of section 23-A of the Indian Income-tax Act, 1922, was permitted to be challenged. Again, in Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City [1955] 1 S.C.R. 829; 26 I.T.R. 758., in a reference under section 66(1) of the Indian Income-tax Act, 1922, a question as to the vires of section 12-B of the Indian Income-tax Act was raised before the Income-tax Appellate Tribunal and was referred to the Bombay High Court. This Court in appeal from the opinion expressed by the High Court on the reference also considered that questions. Also, in Gannon Dunkerley Co. v. State of Madras [1954] 5 S.T.C. 216; I.L.R. 1955 Mad. 832., the proceeding reached the High Court of Madras in a revision petition under section 12-B of the Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as well as before the Revising Authority. It was pointed out that the appellate order was made on January 4, 1952, and the revision application was filed before the amending Act of 1954 came into force. It further appears that the revision application was disposed of on July 8, 1957, by the Revising Authority. The contention put forward on behalf of the appellants was that the Commissioner had no power to apply for a reference at the time the appellants had made the application for revision. It was conceded by Mr. Chagla that at the time the Commissioner applied for a reference under section 11 of the Act the amending Act of 1954 had already come into force and under the amended section the Commissioner was empowered to ask for a reference. The point taken was that the material date was the date on which the appellants made the application for revision and not the date on which the application was actually decided by the Revising Authority. We are unable to accept this argument as correct. The right to apply for a reference is conferred upon a person aggrieved by an order passed under section 10 and this right exists regardless of when the application for revision was made. Only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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