TMI Blog1968 (8) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... asthan High Court (I.N. MODI and B.P. BERI, JJ.) dated 20th April, 1965, was as follows: The judgment of the Court was delivered by MODI, J.- This is a writ petition by Messrs Karam Chand Thappar and Brothers (Coal Sales) Limited, Jaipur, under Article 226 of the Constitution, praying for a writ of certiorari or a direction in the nature thereof against an order of assessment dated the 20th December, 1956, (exhibit P-9) and a demand notice (exhibit P-9A) dated the 12th February, 1957, of the Sales Tax Officer, City Circle A, Jaipur. The State of Rajasthan has also been impleaded as respondent No. 2 in this petition. This petition originally came for hearing and was allowed by a Bench of this Court (consisting of Sarjoo Prosad, C.J., and Beri, J.[1965] 16 S.T.C. 412 at p. 413.) by its order dated the 21st April, 1961. The ratio of that decision was that the petitioner was not a dealer within the meaning of section 2(f) of the Rajasthan Sales Tax Act, 1954 (Act No. 29 of 1954, hereinafter called the Act of 1954) but was merely a broker or a middleman and, therefore, it was not liable to pay sales tax on the coal supplied by it to the State. The petitioner had also disputed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h did retail business and also supervised the supply of coal made to consumers by the collieries, and was registered as a dealer with the Sales Tax Officer, Jaipur. On the 2nd September, 1948, the petitioner entered into an agreement with the Equitable Coal Company Ltd. (hereinafter called the collieries) which owns collieries in the State of Bengal, whereby it obtained a monopoly from the said company for the supply of coal in certain areas including Rajputana as it was then called. According to this agreement, the said collieries could effect the sales of their products through the agency of the petitioner and none else. On 28th April, 1955, the petitioner entered into a contract with the Government of Rajasthan for the supply of coal for one month to the power-house at jaipur for the first time. Similar agreements were then entered into later for the regular supply of coal to the aforesaid power-house as well as that situated in the town of Kota. The petitioner supplied coal under this arrangement up to May, 1958. The petitioner as a dealer submitted its return to the Sales Tax Department for the year 1955-56 (it also submitted a like return for 1956-57 which was pending asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be forfeited in the event of their failure to fulfil their part of the contract satisfactorily. 3.. The test report given by the laboratory at Jaipur Power House will be final. 4.. The decision of the Chief Engineer, Electrical and Mechanical Department, Government of Rajasthan, will be final for all purposes. 5.. The coal will be supplied F.O.R. colliery subject to the following: (a) Payment will be claimed only in respect of supplies actually received and admitted as per specifications at the Jaipur Power House. (b) The contractor will arrange all the transport and safe delivery of coal at Jaipur Power House.ur Power House within 10 days from the date of order and supplies will not be less than 150 tons per day for the first ten days. 6.. Coal will be supplied at the controlled rate. Railway freight will be paid by the coal supplier in the first instance and reimbursement claimed afterwards on the strength of relevant vouchers along with the bill, for the admitted supplies of the coal in Jaipur Power House." It will be observed that according to clause 6 of the agreement, coal was to be supplied at the controlled rate and the railway freight was to be paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lliery owner, shall sell, agree to sell, or offer to sell coal at a price different from the price fixed in that behalf under clause 4 or while purporting to charge a price not different from the price fixed under clause 4, grant or agree to grant any commission, rebate or such other concession in any form which will have the effect of reducing either directly or indirectly the said price so far as the purchaser is concerned." Then comes clause 6 and its first two sub-clauses read as follows: (1) Where a colliery owner has signified to the Deputy Coal Controller (Distribution) in writing his willingness to sell direct to consumers and an allotment is made by the Deputy Coal Controller (Distribution) to a consumer with his consent for such direct sale, the coal shall be delivered to the consumer at the price fixed under clause 4, and no commission or other charges shall be paid in addition, except that where a broker is employed, brokerage not exceeding six annas per ton may be paid by the colliery owner to the broker. (2) Where a consumer purchases coal through a del credere agent such agent shall not, on the sale of such coal, charge or receive from the consumer a margin ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or his agent shall despatch or agree to despatch or transport any coal from the colliery except under the authority and in accordance with the conditions contained in a general or special authority of the Central Government." Again by clause 15, the functions of the Central Government under clauses 8 and 12-E among others have been made exercisable also by the Coal Controller with the Government of India, the Deputy Coal Controller (Distribution), the Deputy Coal Controller (Production) and the Joint Deputy Coal Controller (Distribution). The point to decide having regard to the provisions of the Colliery Control Order referred to above in some detail is whether the supplies made by the petitioner from the collieries to the State Power House could be treated as a sale in the eye of law. The argument of the learned Advocate-General was that although the transactions in question were governed by certain restrictions imposed by the Government of India, they essentially amounted to those of sale and purchase, the contention being that only those transactions which fell under clause 8 of the Control Order could not be regarded as sales but not those which were entered into and fell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme Court in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar [1963] 14 S.T.C. 316. The facts of this case are as follows. The assessees were manufacturers of sugar in Bihar and they despatched large quantities of sugar to the various agents of the State of Madras in compliance with the directions issued by the Controller exercising powers under the Sugar and Sugar Products Control Order, 1946. The course of dealing between the parties was that the various State Governments intimated to the Sugar Controller their requirements of sugar and similarly the factory owners sent to the Sugar Controller the statements of stocks of sugar held by them. After considering the requirements and the statements, the Sugar Controller made the allotments. In each case, the allotment order was addressed to the factory owner, directing him to supply sugar to the State Government in accordance with the despatch instructions received from the competent officer of the State Government. A copy of the allotment order was simultaneously sent to the State Government on receipt of which the competent authority of the State Government sent to the factory concerned detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to ignore the true position of the parties, and the circumstances in which goods were delivered." Lastly, it was held by their Lordships that the intimation by the Province of Madras of its requirement to the Controller did not amount to an offer and the supply of goods pursuant thereto to the assessees did not amount to its acceptance and therefore no sale resulted and consequently no liability to pay sales tax under the Bihar Sales Tax Act could possibly arise. The question then is: how does the above decision apply to the facts and circumstances of the present case. According to the actual procedure, which was adopted for the supply of coal by the petitioner to the State and which was not disputed by the State before the High Court or the Supreme Court, the Chief Engineer, Electrical and Mechanical Department, Government of Rajasthan, Jaipur, contacted the Deputy Coal Controller, Calcutta, for a monthly ad hoc allotment for the supply of coal through the petitioner, and a copy of this requisition was marked to the petitioner's office at Jaipur. On the basis of this demand, the petitioner through its head office at Calcutta submitted the programme to the Deputy Coal Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade", we should like to point out that the period with which we are concerned in this case is from the 1st April, 1955, to the 31st March, 1956. Now, Article 286 of the Constitution before it was amended by the Constitution (Sixth Amendment) Act, 1956, stood as follows: "(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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the power to tax sale or purchase of goods other than newspapers made in the course of inter-State trade or commerce. Properly speaking, therefore, we are concerned with the law which was in force before Article 286 was amended, and, that being so, clause (2) of Article 286, as it then stood, clearly ordained that, unless Parliament provided otherwise, no State could impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase took place in the course of inter-State trade or commerce. It is no body's case that the Parliament had made a different provision derogating from this general position. The only question which then arises is: What is inter-State trade. The answer to this is provided by the decision of their Lordships of the Supreme Court in The Cement Marketing Company v. State of Mysore [1963] 14 S.T.C. 175. That case unmistakably lays down that where the contract of sale occasions or involves the movement of goods from one State to another, that is for example, where by the very contract of sale, goods which are manufactured in one State are required to be transported to another State for consumption or use, such transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid period shall be deemed always to have been validly levied or collected in accordance with law." The historical background of this legislation is this. It was held by the Supreme Court by majority in The State of Bombay v. United Motors (India) Ltd.[1953] 4 S.T.C. 133; A.I.R. 1953 S.C. 252., that sub-clause (a) and the Explanation in clause (1) of Article 286 prohibited the taxation of a sale involving inter-State elements by all States, except the State in which the goods were delivered for the purpose of consumption therein, and furthermore, that clause (2) did not affect the power of that State to tax the inter-State sale even though Parliament had not made a law removing the ban imposed by the clause. The result of this was that dealers resident in one State were subjected to the sales tax jurisdiction and procedure of several other States with which they had dealings in the normal course of their business. In the case of Bengal Immunity Co. Ltd. v. State of Bihar [1955] 6 S.T.C. 446; A.I.R. 1955 S.C. 661., the Supreme Court reversed its earlier decision in the United Motors' case [1953] 4 S.T.C. 133; A.I.R. 1953 S.C. 252. and construed Article 286 in a manner that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equally strenuously contended that the case on this view of the matter should be remanded back for a fresh assessment for sales made during this period. On a most careful and anxious consideration of the rival arguments, we are inclined to the view that as the assessment is a composite and indivisible one, the total assessment has to be declared as illegal and void. Reference may be made in support of this view to Provincial Government of Madras v. J.S. Basappa [1964] 15 S.T.C. 144. It was held in that case that when an assess- ment consists of a single undivided sum in respect of the totality of the property treated as assessable, the wrongful inclusion in it of certain items of property which by virtue of a provision of law were expressly exempted from taxation, renders the assessment invalid in toto though in those cases where the assessment of many matters results in amounts of tax which, though parts of the whole assessment, stand as completely separate items, the court can declare such separate items as illegal and exclude them from the levy. But where the tax is a composite one and to separate the good part from the bad, proceedings in the nature of assessment have to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee acquired monopoly rights to supply on behalf of the collieries, coal in certain areas including Rajasthan. Under an agreement dated April 28, 1955, with the State of Rajasthan the assessee supplied coal to the State Power Houses up to May 19, 1958. The Sales Tax Officer, City Circle A, Jaipur, assessed to tax the turnover of the assessee in the year 1955-56 from the supply of coal to the State of Rajasthan. The assessee then moved a petition under Article 226 of the Constitution in the High Court of Rajasthan for a writ quashing the order of assessment of the Sales Tax Officer. The High Court accepted the plea that the assessee was not a dealer within the meaning of the Act and quashed the assessment. In appeal by the State of Rajasthan against the order of the High Court, this Court held that the assessee was a dealer within the meaning of the Explanation to section 2(f) of the Rajasthan Sales Tax Act, since the assessee was an agent for sale for the Equitable Coal Company which carried on the business of buying, selling or supplying goods in the State. But this Court remitted the case to the High Court for determination of certain other questions which were not decided [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prices at which coal may be sold by colliery owners. By clause 5 the colliery owners and their agents were prohibited from selling or agreeing to sell or offering to sell coal at a price different from the price fixed in that behalf under clause 4. By clause 6 it was provided that where a colliery owner has signified to the Deputy Coal Controller (Distribution) in writing his willingness to sell direct to consumers and an allotment is made by the Deputy Coal Controller to a consumer with his consent for such direct sale, the coal shall be delivered to the consumer at the price fixed under clause 4, and no commission or other charges except brokerage shall be paid in addition. By clause 8 the Central Government was authorised to issue from time to time such directions as it thought fit to any colliery owner regulating the disposal of his stocks of coal or of the expected output of coal in the colliery during any period, including directions as to the grade, size and quantity of coal which may be disposed of and persons or class or description of persons to whom coal shall or shall not be disposed of, the order of priority to be observed in such disposal, and the stocking of coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stock of sugar held by them. The Sugar Controller then made allotments taking into consideration the supply position and the requirements of the States. The Sugar Controller then intimated the allotment order to the factory owner, directing him to supply sugar to the State Government in accordance with the despatch instructions received from the State Government. A copy of the allotment order was also sent to the State Government concerned, on receipt of which the competent authority of the State Government sent to the factory concerned instructions about the destination to which the sugar was to be despatched and the quantity of sugar to be despatched. On these facts it was held that there was no contractual relation between the State Government and the factory owner. The Sugar Controller directed the manufacturer of sugar to supply sugar to the State Government and the factory owner complied with the direction. This Court in two recent judgments has held that when goods, supply of which is controlled by statutory orders, are delivered pursuant to contract of sale, the principle of the case in M/s. New India Sugar Mills Ltd.'s case [1963] Supp. 2 S.C.R. 459; 14 S.T.C. 316., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the crushing season certain sugarcane crop grown in the area, and at the minimum price notified by the Government from time to time, upon the terms and conditions mentioned in the agreement. Under the Act and the Rules framed thereunder, the cane grower in the factory zone was free to make or not to make an offer of sale of cane to the occupier of the factory. But if he made an offer, the occupier of the factory was bound to accept it. The resulting agreement was recorded in writing and was signed by the parties. The consent of the occupier of the factory to the agreement, it was held, was free, and in spite of statutory compulsion, the agreement was neither void nor voidable. Purchases of sugarcane under the agreement could, it was held, be taxed by the State Legislature under the Act enacted in exercise of the power conferred under entry 54, List II, of Schedule VII, to the Constitution of India. There was in the present case an agreement of sale between the parties competent to contract and in pursuance of the agreement of sale, property in the goods supplied passed to the purchaser for price agreed to be paid. The transaction was, therefore, one of sale of goods wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 612., in which this Court directed that the order of assessment for the period January 1, 1955, to May, 1959, challenged by the taxpayer could be split up and dissected so as to uphold it in so far as it related to items of sale which could be separated and taxed for different periods, and a writ of mandamus would issue directing the State not to realize sales tax only in respect of transactions of sale which were not taxable. There is no inconsistency between the principles of the cases of Ram Narain Sons Ltd. [1955] 6 S.T.C. 627., and Caltex (India) Ltd. [1966] 17 S.T.C. 612., In Ram Narain Sons Ltd.'s case [1955] 6 S.T.C. 627., this Court, after declaring that the assessment was invalid, directed that the matter will go back to the assessment officer for re- assessment of the appellants in accordance with law: see pages 638 and 643. In Caltex (India) Ltd.'s case [1966] 17 S.T.C. 612., the Court issued a writ of mandamus prohibiting the State from realizing sales tax with regard to the transactions on which the sales tax was not validated by the Sales Tax Laws Validation Act, 1956. The effect of the two orders is the same. A writ of mandamus will issue directing the State of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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