TMI Blog1956 (10) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... to the 31st of March, 1951, by virtue of the President's Sales Tax Continuance Order, 1950. As a result, therefore, the petitioner was assessed to sales tax to the extent of Rs. 7,46,876-1-3. This amount included the tax of Rs. 7,10,185-12-0 on the sale price of goods despatched outside Bihar and delivered for consumption in other States. The amount of sales tax was duly paid on behalf of the petitioner. An appeal was, however, taken on behalf of the petitioner to the Deputy Commissioner of Sales Tax against the order of assessment, but the appeal was dismissed. The petitioner filed an application in revision before the Board of Revenue, and on the 28th of August, 1953, the Board of Revenue allowed the revision application and held that the petitioner was entitled to exemption in respect of the sale price of goods despatched to places outside the State of Bihar. The relevant portion of the order of the Board of Revenue is to the following effect: "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(1). But this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of goods in the course of inter-State trade or commerce. It was submitted that the effect of the decision of the Supreme Court in the United Motors' case(1) was that Article 286(1)(a) of the Constitution, read with the Explanation thereto, prohibited taxation of sales or purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. It was submitted that in a later decision in the Bengal Immunity case(2) the Supreme Court expressed the view that the prohibition on taxation of inter-State sales imposed by Article 286(2) had a greater and more powerful overriding effect. It was affirmed by the majority of the learned Judges of this case that the Explanation to Article 286(1)(a) of the Constitution was meant to explain what an outside sale referred to in sub-clause (1)(a) was and that it did not confer or enlarge the legislative powers of the States. It was further held that the Explanation could not be legitimately extended to clause (2) of Article 286, either as an exception or as a proviso thereto. The decision of the majority of the learned judges was that no State law can impose or authorise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r commerce during the period between the 1st day of April, 1951, and the 6th day of September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the course of inter-State trade or commerce; and all such taxes levied or collected or purporting to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law. Explanation.-In this section, 'law of a State' in relation to a State specified in Part C of the First Schedule to the Constitution, means any law made by the Legislative Assembly, if any, of that State or extended to that State by a notification issued under section 2 of the Part C States (Laws) Act, 1950." On behalf of the petitioner reliance was, however, placed on the decision of the Supreme Court in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax and Others(2) and it was submitted that neither the President's Order nor the Central Act No. 7 of 1956 could lift the ban with regard to transactions covered by the Explanation to Article 286(1)(a) of the Constitution. In my opinion, the argument addre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st category of sales, Ram Narain Sons' case(1) clearly demonstrates that there are two hurdles to surmount, and the President's Order of 1950 and the Central Act 7 of 1956 are ineffectual and inoperative, because the ban imposed by the Explanation to Article 286(1)(a) has not been surmounted. In the present case, however, the petitioner has already been given relief by the Sales Tax Department with regard to the first category of sales. The application of the petitioner in both the Miscellaneous Judicial Cases Nos. 330 and 331 of 1955, seeks relief (1) [1955] 6 S.T.C. 627. with regard to the second category of sales. The principle of Ram Narain Sons' case(1) has, therefore, no application, because that was a case dealing with the first category of sales. To put it in other words, there is only one ban to be surmounted in the present case, namely, the ban imposed by Article 286(2) of the Constitution, and that ban has been surmounted by the President's Order and the Central Act No. 7 of 1956. It follows, therefore, that the imposition of sales tax by the authorities on the second category of transactions is legally valid and the petitioner is not entitled to a refund of the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty case(1). I do not think this argument is right. In the United Motors' case(2) the doctrine of nexus was expressly applied by the Supreme Court to a Provincial statute imposing sales tax. It was held by the Supreme Court in that case that Article 286(1)(a) of the Constitution, read with the Explanation thereto and construed in the light of Article 301 and Article 304, prohibited the taxation of sales involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. It was affirmed by the Supreme Court that the latter State had authority to tax such sales or purchases, not by virtue of the Explanation to Article 286(1) but by virtue of Article 246(3), read with entry 54 of List II of the Constitution. It is true that in the Bengal Immunity case(1) the Supreme Court reversed by a majority its previous decision in the United Motors' case(2) so far as the interpretation of Article 286(1)(a) and Article 286(2) of the Constitution was concerned. It was held by the majority of the learned judges that Article 286(2) prohibited the imposition of any tax on sales and purchases of goods even though the goods had actually b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also put forward the argument that only the consuming State had the authority to impose sales tax by virtue of the Explanation to Article 286(1)(a) and that no other State except the consuming State may impose sales tax, even though such ingredients of the sale transaction like passing of title, making of con- tract and delivery may take place within the frontiers of that State. I think the argument has been put in an extravagant form and suffers from an obvious fallacy. The argument proceeds upon the assumption that the Explanation to Article 286(1)(a) is a source of power of the taxing State. I think that assumption is not correct. The grant of taxing power under the Constitution to the State is under Article 246(3) read with entry No. 54 of List II of the Seventh Schedule. The pro- vision of Article 286(1)(a) is only in the way of restriction or fetter on the legislative power of taxation. The affirmative grant of power is contained in Article 246(3) and in entry No. 54 of List II of the Seventh Schedule. I think that the language of Article 246(3) and of entry No. 54 is wide enough to support the taxation of the petitioner in the present case with regard to the second category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of mandamus for the purpose of refunding the tax. The real question in this case is not whether the respondents should be asked to comply with the order of the Board of Revenue; the real question is whether the tax in question has been illegally realised by the respondents and whether the petitioner is entitled to a refund of the amount of tax. If the imposition and the realisation of tax is not illegal, there is no legal duty cast upon the respondents to refund the tax realised. Dr. Sultan Ahmad contended on behalf of the petitioner that even if the Board's order was illegal, the petitioner was entitled to pray to the High Court for the grant of a writ of mandamus to compel the State of Bihar to obey the illegal order of the Board of Revenue. This pro- position is surely not correct; and as I have said, the real question in this case is whether the imposition of tax upon the petitioner was illegal and whether there is a duty cast upon the respondents to refund the amount of tax illegally realised. I have already given reasons for reaching the conclusion that the Sales Tax Authorities were legally entitled to realise sales tax with regard to the second category of (1) [1953] 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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